Helping people reach
their destination
Annual Report
2018
Viva Energy is one
of Australia’s leading
energy companies.
We are proud of our
110-year history in
Australia helping
people reach their
destination.
About this Annual Report
This Annual Report contains information on the
operations, activities and performance of the ‘Viva
Energy Group’ (or ‘Group’) for the period ended
31 December 2018 and its financial position as at
31 December 2018. The Group comprises Viva Energy
Group Limited (ACN 626 661 032) (the ‘Company’)
and its controlled entities.
In this Annual Report, references to ‘we’, ‘us’, and ‘our’,
are references to the Viva Energy Group.
The Company was admitted to the Official List of ASX
on 13 July 2018. In connection with its ASX listing, the
Company completed a corporate restructure, which
included the acquisition of Viva Energy Holding Pty
Limited (former holding entity of the Viva Energy
Group) and its controlled entities. The Company was
incorporated on 7 June 2018 and, except for the
corporate restructure to acquire Viva Energy Holding
Pty Limited and its controlled entities, the Company
did not trade separately prior to the ASX listing.
Accordingly, the full year results of Viva Energy Group
Limited presented here, and the previous period results
presented for comparison, adopt and incorporate
the results of Viva Energy Holding Pty Limited and
its controlled entities at such time.
Printed copies of this Annual Report will be posted
to those shareholders who have requested to
receive a printed copy. Otherwise shareholders are
notified when the Annual Report becomes available
and provided details of where the report can be
accessed electronically.
Contents
About us
Chairman and Chief Executive Officer’s report
Operating and financial review
Sustainability
Board members
Executive Leadership Team
Financial report
Directors’ report
Auditor’s independence declaration
Consolidated financial statements
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report
Disclosures
Additional information
Corporate directory
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Corporate Governance Statement
The Company’s Corporate Governance Statement can
be viewed in the Investor Centre section on our website
www.vivaenergy.com.au
VIVA ENERGY GROUP LIMITED / ABN 74 626 661 032
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018
Viva Energy is one of Australia’s
leading energy companies,
supplying approximately a
quarter of the country’s liquid
fuel requirements through its
commercial business and a
network of more than 1,250 service
stations across the country.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 About us
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Viva Energy is one of Australia’s
leading energy companies, supplying
approximately a quarter of the country’s
liquid fuel requirements through its
integrated network of more than 1,250
service stations across the country, along
with its diverse commercial business.
by an extensive infrastructure footprint
including more than 20 terminals. Viva
Energy supplies fuel into more than 50
airports and airfields across the country.
It is the sole supplier of Shell branded
automotive fuel, lubricants and greases
in Australia.
Viva Energy owns and operates the
strategically located Geelong Refinery
in Victoria, and operates bulk fuels,
aviation, bitumen, marine, chemicals
and lubricants businesses supported
Viva Energy’s vision is to:
• focus on continued operational
excellence and safe and reliable
operations;
• be one of Australia’s most respected
energy companies;
• expand its markets through innovation
and a dedicated customer-centric focus;
• care for the environment and the
communities in which it operates
by dealing responsibly with all its
stakeholders; and
• deliver attractive and sustainable
shareholder returns and consistent
operating cash flows.
Supplying approximately
¼
of the country’s liquid
fuel requirements
14,045ML
Total volume
1,255
Retail fuel and
convenience stores
$528.9m
Group Underlying EBITDA (RC)*
$293m
Underlying NPAT (RC)
4.8c
Dividend per share**
15.1c
Underlying Basic Earnings
Per Share (RC)
120kb/d
Capacity Refinery
More than
1,200
Employees
* Viva Energy reports segment information on a ‘replacement cost’ (RC) basis. See section 4.3.1 of the prospectus issued in connection with the Company’s
initial public offering (Prospectus) for a description of the difference between ‘historical cost’ (HC) and ‘replacement cost’ accounting. See further the
description of the accounting policy for ‘Inventories’ in Appendix C of the Prospectus.
** The final dividend for the six months ended 31 December 2018. No interim dividend was paid in 2018.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team
Chairman and Chief Executive Officer’s report
“Viva Energy has demonstrated
encouraging performance and delivered
on a number of key initiatives, which
will support growth in the year ahead.”
Dear Shareholder,
Viva Energy is proud of its 110 years of
history operating in Australia, and 2018
signalled an exciting new chapter for our
business, with the listing of the Company
on the Australian Securities Exchange
(ASX) on 13 July 2018. On behalf of the
Board, we welcome you as a shareholder
and present Viva Energy’s first Annual
Report as a listed Company.
An historic year with good
progress on many fronts
Despite an extremely challenging
regional refining margin environment
in the latter part of the second half of
2018, Viva Energy has demonstrated
sound performance in our other
segments and delivered on a number
of key initiatives, which will support
growth in the year ahead.
Our number one commitment remains
to the safety of our people and the
communities in which we operate.
We pride ourselves on running a
business built on safety and protection
of the environment and we continue
to pursue ‘Goal Zero’, Viva Energy’s
objective to cause no harm to people
or the environment.
During the year, Viva Energy has grown
its Retail network to 1,255 sites, including
through acquiring a 50% interest in
Westside Petroleum. The Aviation
business was fully transitioned from
Shell, and we have continued to see
solid sales performance in this and other
commercial segments on the back of
generally healthy economic activity
throughout the year.
The Company successfully completed
the planned maintenance turnaround
of the secondary distillation unit at
the Geelong Refinery and associated
furnace upgrade, which, along with
other improvements, support an annual
crude intake of up to 44M barrels,
leaving us well positioned for any future
improvements in refining margins.
The business also successfully transitioned
from the legacy SAP enterprise platform
to Oracle JDE, and completed the
conversion of our old refinery in Clyde,
Sydney, into our largest import terminal
in Australia, in turn improving our supply
competitiveness into one our most
important markets. Further improvements
in supply chain capability were achieved
through the construction of jet storage in
Cairns, and a new bitumen import facility
in Northern Queensland.
Financial performance
in line with updated
market guidance
2018 was a challenging year with the
Group’s expected financial performance
negatively impacted by weakness in
regional refining margins. In aggregate,
the remaining business segments
(excluding Refining) performed strongly.
The results included:
• Group Underlying EBITDA (RC)
of $528.9 million; and
• Underlying NPAT (RC) of
$293.0 million.
The Retail division performed well
despite lower sales volumes from the
Coles Alliance network. The Commercial
division has continued to deliver through
retention of contracts as well as securing
a number of new contracts.
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Robert Hill
Chairman
Scott Wyatt
Chief Executive Officer
Inaugural dividend
The Board has declared a fully franked
dividend of 4.8 cents per share for
Viva Energy’s inaugural dividend for
the six months ended 31 December
2018, representing a payout ratio
of 60% of Distributable NPAT (RC).
Our people
Our people are core to our success
and once again in FY2018 we continued
to focus on the development of our
people and culture.
We were pleased to welcome Megan
Foster as our new General Manager,
Retail, with Daniel Ridgway taking
the newly created position of Chief
Operating Officer, where he will continue
to help drive business opportunities and
ensure our ongoing safe and
reliable operations across all parts of
the Company. Megan has over 25 years’
experience in retail and will be a
tremendous addition to our Company.
Diversity in all its forms remains a key
focus for Viva Energy, and we pride
ourselves on the culture we foster in
our workforce. Women comprise 22%
of the total workforce and
approximately 41% of the senior
leadership group. We were delighted
to be awarded the WGEA Employer
of Choice for Gender Equality citation
for the second consecutive year
(2018–2019).
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Viva Energy’s new Board of
Directors brings significant
expertise and a diverse
range of skills that are well
suited to the governance
of the Company.
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Board and governance
Viva Energy’s new Board of Directors
brings significant expertise and a diverse
range of skills that are well suited to
the governance of the Company.
The Board has overseen the important
task of transitioning Viva Energy to the
listed environment, and has worked
closely with management to ensure
the establishment of appropriate
governance standards and processes.
The Company’s corporate governance
practices are discussed in detail in
Viva Energy’s Corporate Governance
Statement, which is available at
www.vivaenergy.com.au
Looking forward
In February 2019, we announced an
extension of the Alliance with our retail
partner Coles until 2029. Under this
revised agreement, Viva Energy has
assumed full responsibility for retail fuel
pricing and marketing across the Alliance
network. The partnership between
ourselves and Coles has never been
stronger, with the new Coles Alliance
agreement providing promising scope
for future growth in the Retail segment,
and we look forward to continuing our
relationship into the future.
We also announced, in February 2019,
an acquisition of the remaining 50 per
cent interest in Liberty Oil’s wholesale
business. This is a significant step in our
regional growth strategy. As part of that
transaction, we also announced that we
will establish a new retail joint venture to
continue to grow the existing Liberty Oil
retail business.
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It has been a landmark year for Viva
Energy, and we look forward to the
road ahead. Our management team
and Board remain focused on our goal
to be one of Australia’s most respected
energy companies, through the safe
and reliable operation of our businesses
with respect for the environment and
communities in which we operate.
We will continue to drive growth
and are focused on value creation
and reliable shareholder returns.
We thank you for your ongoing support.
Robert Hill
Chairman
Scott Wyatt
Chief Executive Officer
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team
Viva Energy owns and operates
its refinery in Geelong, Victoria,
which converts imported and
locally sourced crude oil into
petroleum products, including
gasoline, diesel, jet fuel, aviation
gasoline, gas, solvents, bitumen
and other specialty products.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Operating and financial review
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Company history
Viva Energy has its origins dating back
over 110 years when Shell Transport and
Trading Company and the Royal Dutch
Petroleum Company established the
British Imperial Oil Company in Australia
as a joint venture in 1907. Following this,
the business was operated by the Shell
group as the Shell Australia downstream
petroleum business for over 100 years.
In 2014, a Vitol-led consortium, Vitol
Investment Partnership, acquired the
Shell Australia downstream business
(excluding the aviation business) and
the business was renamed Viva Energy.
The aviation business was subsequently
acquired and reintegrated in 2017. Viva
Energy was admitted to the Official List
of the ASX on 13 July 2018.
Company overview
Viva Energy is one of Australia’s leading
integrated downstream petroleum
companies. During 2018, Viva Energy
supplied approximately 14 billion litres
of petroleum products (close to a quarter
of Australia’s fuel needs). Viva Energy
supplies those products to a national
network of retail sites and directly to
commercial customers, and has the
sole right to use the Shell brand in
connection with the sale of automotive
fuels in Australia. The Company also
operates a nationwide fuel supply chain,
including a strategically located refinery
in Victoria, and an extensive import,
storage and distribution infrastructure
network, including a presence at over
50 airports and airfields. Viva Energy’s
procurement function leverages the
extensive trading network and supply
systems of Vitol, one of the world’s
largest independent energy commodity
trading companies, to facilitate the
sourcing of most of its crude oil and
finished products. Viva Energy also holds
a number of strategic investments in
complementary businesses, the largest
of which is 38% of Viva Energy REIT (as
at 31 December 2018), an ASX-listed
company and property trust that owns
service station property assets that it
leases to Viva Energy and Liberty Oil.
During 2018, Viva Energy supplied
approximately 14 billion litres of
petroleum products (close to a
quarter of Australia’s fuel needs).
Viva Energy operates across three
business segments:
Retail, Fuels and Marketing
Retail
Viva Energy supplies and markets
quality fuel products through a national
network of retail sites. The majority
of this network is Shell-branded, and
over 700 of the sites are operated by
Coles Express under the Coles Alliance.
Viva Energy also supplies other retail
operators and wholesalers.
Commercial
Viva Energy is a leading supplier of
fuel, lubricants and specialty products
to commercial customers in the
aviation, marine, transport, resources,
and construction and manufacturing
industries, underpinned by long-
standing customer relationships.
Refining
Viva Energy owns and operates its
refinery in Geelong, Victoria, which
converts imported and locally sourced
crude oil into petroleum products
including gasoline, diesel, jet fuel,
aviation gasoline, gas, solvents, bitumen
and other specialty products.
Supply, Corporate and
Overheads
Viva Energy owns or has contracted
access to a national infrastructure
network comprising import terminals,
storage tanks, depots and pipelines
positioned across metropolitan and
regional Australia in all states, and also
uses three refuelling barges in Sydney
and Melbourne. Viva Energy also
contracts with a number of transport
companies, providing for the efficient
distribution of its products to market.
Viva Energy’s strategy
Viva Energy seeks to deliver strong
cash generation and attractive and
sustainable shareholder returns by
growing the markets in which we operate
and improving operational efficiency.
Viva Energy’s strategy is to build
sustainable growth in Retail, Fuels and
Marketing, improve cost performance
in Supply, Corporate and Overheads
and manage volatility in Refining. These
objectives are balanced with a focus on
prudent capital management including
required capital investment to support
asset integrity of retail, supply and
refining infrastructure and investment in
selected growth projects that further Viva
Energy’s strategic position and deliver
appropriate returns.
In the short to medium term,
management will be focused on the
following key pillars to deliver the
strategic objectives outlined above.
Safe and reliable operations
We believe every incident is preventable
and are committed to pursuing the goal
of no harm to people and protecting the
environment. We call this ‘Goal Zero’.
To achieve this we manage safety in
a systematic way and we also believe
that providing a safe workplace and
ensuring safe outcomes is an ethical
responsibility. Our people at all levels of
the organisation are the solution to any
challenge and hold the resilience that
our safety systems need to effectively
function. Viva Energy’s principal ambition
is to deliver safe and reliable operations,
which can only be achieved through
effective management of both personal
and process safety matters, as well as
focused asset integrity management and
proactive health and wellness initiatives.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team
Operating and financial review continued
Grow the Retail Alliance
In February 2019, Viva Energy announced
certain amendments to the Alliance
agreement, which means that Viva
Energy will be responsible for the
pricing and marketing of retail fuel at
over 700 Alliance sites from March 2019
onwards. Viva Energy intends to grow
volume through the Alliance network
to 70 million litres per week, and then
to over 75 million litres per week as
marketing and pricing programs mature.
This growth is expected to deliver both
improved volume and aggregate margin
in the retail sub-segment.
Extending the retail site network
Viva Energy continues to fill network
gaps through the addition of new sites,
as well as through acquisitions into
areas in which Viva Energy has limited
presence. Historical examples of this
include the acquisitions of Liberty and
Westside, which opened up the potential
of growth into rural and regional areas.
The Company will continue to pursue
similar opportunities in order to grow
its retail network.
Growing fuel margin
There is scope to generate margin
improvements through the increase of
market share by delivering an improved
value proposition to customers through
loyalty offers, increased product range,
and through operating under a premium
brand. We will continue to roll out Shell
V-Power Diesel to more sites in 2019, to
enable customers the choice between a
standard and premium diesel offering.
Further services may be offered to
customers as technology advances, which
could include electric vehicle charging,
replenishing hydrogen fuel cells, and
compressed natural gas or liquefied
natural gas refuelling services.
Growing convenience and non-
fuel earnings
Viva Energy’s partnership with Coles
continues to provide it with a strong
convenience customer offering, which
continues to grow through the increased
presence and take-up of ‘Click and
Collect’ and trialling fresh product
offering. Coles Express aims to roll out
its food-to-go offer to over 500 stores
by the end of June 2019. In addition
to the Alliance, Viva Energy continues
to develop its own convenience offering
capabilities, which can be deployed
in locations where the Coles Alliance
offer may not be suitable.
Deepen commercial markets
Viva Energy’s infrastructure, terminals,
refinery and other assets allow it to
attract commercial customers from a
range of industries and locations around
Australia. The recent acquisitions of
Shell Aviation and the Liberty business
continue to provide platforms to gain
further growth in the commercial
segment. Commercial markets continue
to be competitive and Viva Energy
is focusing on de-commoditising
commercial markets and expanding our
service offering to deepen customer
relationships and provide value alongside
commercial fuel and specialty products.
Improving refining potential
In addition to regular scheduled
turnarounds, a key focus for the Company
is to increase capacity and reliability of
the Geelong Refinery through ongoing
modernisation programs as well as
several capital projects – such as:
• the recently completed additional
crude storage designed to reduce
crude costs;
Viva Energy and Coles Express have
extended their Alliance until 2029,
with Viva Energy taking full control
of the fuel offer.
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• additional refined product storage
to improve processing efficiency;
• increased utilisation of the pipeline
system servicing Melbourne to grow
sales into Victoria;
• a bitumen export pipeline to grow
markets and utilise surplus production
capacity; and
• a range of other projects to de-
bottleneck processing and unleash
capacity.
Driven by people
We operate with the philosophy that
our business is driven by people and
we place priority on investing in our
people through a range of leadership
development programs, talent
management and an open and
transparent workplace with a focus
on agile ways of working.
2018 business
performance summary
2018 was a significant year for Viva Energy
with the Company listing on the ASX, and
subsequently facing some unexpectedly
challenging trading conditions during
the second half of the year.
Personal safety performance declined
over prior years, with a higher frequency
of personal injuries and an increase in
the number of high potential near-miss
incidents. Process safety incidents,
however, were comparable with prior
years. There was one contractor fatality
when a third party vehicle crossed into
the path of our contract driver in Northern
Queensland. The implementation of
enhanced safety programs during the
second half contributed to an improved
performance, with Geelong Refinery
experiencing more than four months
without a recordable injury. These
programs continue into 2019, and overall
safety performance remains very strong
relative to comparable companies.
Group financial performance was
particularly impacted by volatile and
weaker refining margins during the
latter part of the second half of the year,
together with a number of external events
that adversely affected Geelong Refinery
production. Fuel sales also slowed on
weaker market conditions impacted by
rising oil prices, and lower than expected
sales through the Alliance network.
However, growth in other retail channels
and in our commercial businesses largely
offset these declines, with the Company
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 fi
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finishing broadly in line with its Prospectus1
forecast for total fuel volumes for the
year ended 31 December 2018 (FY2018).
Non-refining segments collectively
finished ahead of the Prospectus
forecasts for Underlying EBITDA (RC)
by approximately $16 million, and for
the full year we reported Group
Underlying EBITDA (RC) of $528.9 million
compared with the Prospectus forecast
of $605.1 million for the same period.
The business has delivered well on
a number of strategic initiatives that
are aimed at delivering future growth.
Retail, Fuels and Marketing
The Company continued to expand
the retail network by 90 sites since
31 March 2018 through the construction
and development of new sites, and
securing new branded supply contracts
with independent operators. The
Company completed the acquisition
of a 50% interest in the Westside
Petroleum business. On 27 February
2019, the Company announced the
acquisition of the remaining 50% interest
in Liberty Oil’s wholesale business and
the establishment of a new retail joint
venture, Liberty Oil Convenience, of
which it will own 50%. This business is
aimed at further growing the Liberty and
Shell branded retail network through
a program of new developments and
site acquisitions, predominantly in
regional markets.
Early in 2019 the Company extended
and revised the terms of the Alliance
agreement through to 2029. Under
this revised agreement Viva Energy
will assume full responsibility for the
provision of the fuel offering, including
retail fuel pricing and marketing across
the Alliance network from early March
2019. This will allow Viva Energy to
provide a more consistent fuel offer
across the Shell branded network,
improve competitiveness, and better
optimise its extensive nationwide
supply chain and refining business.
Coles Express will continue to operate
the stores and provide a leading
convenience offer under the Coles
Express brand. The convenience market
continues to grow and offers revenue
and income growth opportunities
through a combination of traditional
convenience offerings and new
opportunities. These include ‘food-to-
go’ and ‘click-and-collect’ which leverage
Viva Energy’s high quality retail service
station network.
During 2018, a significant number of
our commercial sales contracts were
successfully re-negotiated and extended,
with a number of new contracts also
secured. The Aviation business and on-
airport refuelling offer was rebranded
to the Viva Energy brand, which greatly
increases the visibility of the Viva Energy
brand across more than 50 airports
around the country, and reinforces the
Company’s operational and service
capability in high-touch commercial
markets. The commercial markets remain
highly competitive, so it is pleasing that
the Company delivered on its Prospectus
forecast for the commercial business
and held key customers in all sectors.
Refining
The major maintenance turnaround
of the secondary distillation unit at
Geelong was safely completed along
with other projects that provide
additional crude processing capability
that support the refinery reaching
its crude intake potential. The site
continues to focus on addressing rising
energy costs through energy efficiency
programs and creative procurement
strategies such as the Power Purchase
Agreement with Acciona, which owns
and runs Mt Gellibrand, one of Victoria’s
newest and largest wind farms. This will
support around one-third of Geelong
Refinery’s annual electricity needs. The
new crude tank commissioned in late
2017 has helped Geelong reduce crude
costs through lower demurrage on crude
imports, and the ability to take a wider
range of crudes through enhanced
blending capacity. The site also
successfully introduced dynamic under
keel management programs and trialled
a crude lightering initiative, which allows
larger cargos to be procured.
1. Being the Prospectus lodged with ASIC by Viva Energy Group Limited on 20 June 2018 (Prospectus).
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team
Operating and financial review continued
Supply, Corporate and
Overheads
The commissioning of new jet storage
in Cairns, new bitumen import capability
in Townsville, and conversion of the
prior Shell refinery site in Sydney to a
large-scale fuel import terminal were
all delivered and will greatly improve
our supply capability in these regions.
Projects to construct additional jet
storage in Victoria, petrol storage at
Geelong Refinery, and diesel storage
at Esperance and the Goldfields are all
underway to support market growth and
supply chain efficiency, and are expected
to be commissioned during 2019. The
Company also successfully completed
the transition from the legacy enterprise
SAP platform to a modern Oracle JDE
platform, which will provide capability
to automate tasks, improve operating
efficiencies, introduce new customer
offers, and more generally improve both
customer and employee experiences.
The listing on the ASX and consequent
election to form a new tax consolidated
group resulted in an increase in the
tax base of Group assets based on the
amount subscribed by investors under
the Initial Public Offering (IPO). This
increase will provide additional tax
depreciation deductions to the Group
in future years and was the primary
driver of a one-off deferred tax benefit
of $358.4 million to be recognised during
2018. Notwithstanding challenging
trading conditions during 2018, Viva
Energy continued to be a significant
contributor to Federal and state taxes
in Australia. Our total tax contribution
by way of taxes, duties and excise during
the year was $5.7 billion, which included
current income tax expense of
$78.4 million. Further detail about
our overall tax position will be included
in our annual Taxes Paid Report for
2018, which we will publish along with
our Annual Report in March 2019.
Viva Energy consolidated
results for the full year
ended 31 December 2018
The Group Net Profit After Tax (NPAT)
on a historical cost basis (HC) for FY2018
was $579.6 million (M) compared with a
Prospectus forecast for the same period
of $463.1M. After adjusting for significant
one-off items, net inventory gain/(loss),
and the one-off tax benefit from tax
consolidation, Underlying NPAT on a
replacement cost basis (RC) for the period
was $293.0M compared with a Prospectus
Reconciliation of Statutory Profit After Tax to Underlying NPAT (RC)
A$M
Statutory Profit After Tax
Add: Significant one-off items net of tax
Add: Net inventory loss net of tax
Less: One-off deferred tax benefits including tax consolidation
Underlying NPAT (RC)
579.6
6.3
65.5
(358.4)
293.0
Comparative information
The comparative financial information
contained in the summary statement
of profit and loss and the summary
statement of cash flows represents
the pro-forma financial information for
the year ended 31 December 2017 for
Viva Energy Holding Pty Ltd (VEH) as
disclosed in the Prospectus (FY2017
Pro Forma). The Company considers it
appropriate to complete the operating
and financial review of these summary
financial statements with reference to
the pro-forma financial information for
VEH for the year ended 31 December
2017 instead of the actual historical
financial information for the same period.
The pro-forma financial information that
was disclosed in the Prospectus includes
pro-forma adjustments that present the
financial information in a manner that
is consistent with the structure and
nature of the Group post IPO.
In accordance with relevant regulatory
requirements, the financial report
includes comparative information based
on actual financial information for the year
ended 31 December 2017.
forecast for the same period of $324.1M.
A reconciliation from Statutory Profit
After Tax (HC) to Underlying NPAT (RC)
is summarised in the table above.
Historical cost is calculated in accordance
with IFRS and shows the cost of goods
sold at the actual prices paid by the
business using a first in, first out (FIFO)
accounting methodology. As such, HC
accounting includes gains and losses
resulting from timing differences between
purchases and sales of inventory and
the rise and fall of oil and product prices
during that time. Gains and losses arising
from the rise and fall of oil and product
prices are typically offset by a change
in working capital because of the higher
or lower cost to replenish inventory.
Replacement cost is a non-IFRS measure
under which the cost of goods sold is
calculated on the basis of theoretical
new purchases of inventory instead of
the historical cost of inventory. As a
result, it removes the effect of timing
differences to enable users of the
financial information to more consistently
assess the underlying performance of
the business.
This represented basic earnings per
share (EPS) on a replacement cost basis
of 15.1 cents.
10
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018
FY2018
Actual
16,395.1
(14,750.1)
1,645.0
FY2017
Pro Forma
15,724.3
(13,904.8)
1,819.5
Difference
670.8
(845.3)
(174.5)
(17.7)
22.5
(181.8)
2.5
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738.0
561.6
483.3
36.6
720.3
584.1
301.5
39.1
528.9
608.8
323.8
124.5
(528.2)
(25.3)
63.5
10.2
1.9
(129.7)
355.9
93.6
449.5
(39.2)
316.7
(89.2)
227.5
65.5
293.0
(6.3)
358.4
579.6
645.1
634.3
(105.4)
607.3
311.5
276.1
(560.6)
(28.9)
65.4
15.6
(24.6)
(111.5)
541.6
8.7
550.3
(28.9)
512.7
(157.8)
354.9
6.1
361.0
-
-
354.9
361.0
1.5
12.3
(151.6)
32.4
3.6
(1.9)
(5.4)
26.5
(18.2)
(185.7)
(84.9)
(100.8)
(10.3)
(196.0)
68.6
(127.4)
59.4
(68.0)
(6.3)
358.4
224.7
284.1
Summary Statement of Profit and Loss
A$M
Revenue
Cost of goods sold (RC)
Gross profit (RC)
Retail, Fuels and Marketing
Retail
Commercial
Refining
Supply, Corporate and Overheads
1. Total Underlying EBITDA (RC)
Retail, Fuels and Marketing
Retail
Commercial
Refining
Supply, Corporate and Overheads
Lease straight-lining
Share of profit from associates
Net gain/(loss) on other disposal of PP&E
Revaluation gain/(loss) on FX and oil derivatives
Depreciation and amortisation
Profit before interest and tax (HC)
2. Less: Net inventory (gain)/loss
Profit before interest and tax (RC)
3. Net finance costs
Profit before tax (HC)
4.
Income tax expense
Underlying Net Profit After Tax (HC)
Less: Net inventory (gain)/loss net of tax
5. Underlying Net Profit After Tax (RC)
6. Significant one-off items net of tax
4. One-off deferred tax benefit including tax consolidation
Net Profit After Tax (HC)
Net Profit After Tax (RC)
11
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Operating and financial review continued
Summary Statement of Profit and Loss Analysis
1. Underlying
EBITDA (RC)
A$M
a. Retail, Fuels and Marketing
a(i). Retail
a(ii). Commercial
b. Refining
c. Supply, Corporate and Overheads
Total Underlying EBITDA (RC)
FY2018
Actual
FY2017
Pro Forma
Difference
608.8
323.8
124.5
(528.2)
528.9
607.3
311.5
276.1
(560.6)
634.3
1.5
12.3
(151.6)
32.4
(105.4)
a(i). Retail
Retail consists of earnings from a national network of over 1,200 retail fuel and
convenience sites comprising sites operated through various channels, including
sites operated under a long-term alliance (the Alliance) with Eureka Operations Pty
Ltd (Coles Express), sites operated by other retail commission agents, un-manned
truck stops operated by Viva Energy, and sites operated by independent dealer
owners. Retail also includes fuel supply to Liberty Oil Holdings Pty Ltd (Liberty Oil)
and Westside Petroleum Pty Ltd (Westside), as well as supply to other retail operators
and wholesalers. The Group holds a 50% equity interest in Westside and Liberty Oil
as at 31 December 2018.
The FY2018 performance was impacted by weaker than expected Alliance volumes,
particularly in the second half driven by rising oil prices impacting industry demand
and Alliance retail pricing. Alliance volume declines experienced throughout the
year were largely offset by volume growth in other channels.
Retail achieved Underlying EBITDA (RC) of $608.8M, slightly above FY2017 Pro Forma
and behind the Prospectus forecast for FY2018 primarily driven by weakness in
Alliance volumes.
Retail network expansion continued through Viva Energy controlled, Liberty, and
Westside sites.
a(ii). Commercial
Commercial consists of the supply of fuel, lubricants and specialty products to
commercial customers in the aviation, marine, transport, resources and construction
and manufacturing industries.
Commercial achieved Underlying EBITDA (RC) of $323.8M, finishing ahead of both
FY2017 Pro Forma and the Prospectus forecast for FY2018. A number of large
contracts were re-signed in the second half.
12
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 1. Underlying
b. Refining
EBITDA (RC)
continued
Refining relates to the earnings from the refinery located in Geelong, Victoria (the
Geelong Refinery), which is owned and operated by the Group and converts imported
and locally sourced crude oil into petroleum products including gasoline, diesel, jet
fuel, aviation gasoline, gas, solvents, bitumen and other specialty products.
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Refining delivered an EBITDA of $124.5M, lower than FY2017 Pro Forma and the
Prospectus forecast for FY2018, primarily due to lower regional refining margins
and below plan operational availability.
The Geelong Refining margins dropped to an average of US$7.4/BBL in 2018 against
an average of US$10.2/BBL in 2017. Weakness in regional gasoline margins was the
primary driver of lower margins. Gasoline margins reached historic lows towards the
end of 2018, due to additional supply and processing of light crudes from the USA,
weak regional demand, additional exports from China and additional production from
regional refineries that have upgraded their production of light products in advance
of the IMO2020 Fuel Oil specification change.
Operational availability of 88.4% adversely impacted product yields and throughput
levels (2017 operational availability was 93.7%). Significant external events that
contributed to below plan operational availability included the unplanned outage
of the Residue Cat Cracking unit in the first quarter following an abnormal weather
event, a total site power outage in August due to a lightning strike and constraints
on Geelong production due to issues at a third party polypropylene plant (which uses
feedstock from the refinery).
In the first half of FY2018, the Group completed the planned turnaround of the secondary
distillation unit number 3. This included an upgrade of the unit furnace, delivering
benefits on process safety, production, energy efficiency and maintenance costs.
Despite these availability challenges and lower margins, total throughput of 40.1 MBBLs
was only 1.7% below 2017 throughput of 40.8 MBBLs.
Cost discipline and focus on driving efficiencies resulted in manufacturing costs below
2017, while energy costs increased on the back of higher electricity and natural gas
prices. To manage exposure to energy prices, Viva Energy has moved from being
a retail natural gas buyer to a wholesale gas market participant and entered into a
Power Purchasing Agreement with Acciona’s Mt Gellibrand Wind Farm in January
2019 to provide about one-third of the refinery’s annual electricity needs.
c. Supply,
Corporate
and Overheads
Supply, Corporate and Overheads consists of Viva Energy’s integrated supply chain
of terminals, facilities, depots, pipelines and distribution assets located across
Australia, property including rent for terminals and retail sites and maintenance
costs as well as all head office costs.
The segment ended the year ahead with an Underlying EBITDA ahead of both the
FY2017 Pro Forma and the Prospectus forecast for FY2018. Various significant one-off
savings were achieved including head office and insurance cost savings and lower
than expected property and maintenance costs.
2. Net inventory
gain/(loss)
Net inventory gain/(loss) relates to the effect of movements in oil price and foreign exchange on inventory
recorded at historical cost using the FIFO principle of accounting.
From December 2017 to December 2018, average benchmark crude and finished product prices decreased
by an average of A$5.3/BBL falling further into 31 December 2018. A net inventory loss of $93.6M was
recorded for the full year compared with a net inventory loss of $8.7M for the FY2017 Pro Forma year.
In the Prospectus, no movement in benchmark crude and finished product prices was forecast such that
no forecast net inventory gain/(loss) was included in the Prospectus.
13
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team
Operating and financial review continued
Summary Statement of Profit and Loss Analysis
3. Net finance
costs
For the year ended 31 December 2018, net finance costs consisted of interest income, interest expense
on borrowings, fees associated with trade finance instruments, finance costs associated with finance leases,
amortised financing transaction costs and the unwind of discounting on balance sheet provisions.
Finance costs increased in FY2018 above both FY2017 Pro Forma and Prospectus as a result of higher
daily average borrowing levels during the period relative to the prior year and unwinding of discount
on provisions.
4. Income tax
expense and
one-off deferred
tax benefit
Viva Energy is subject to income tax expense on the basis of historical cost earnings rather than replacement
cost earnings, i.e. NPAT (HC) rather than NPAT (RC). As a result, the movement in income tax expense from
FY2017 Pro Forma and Prospectus forecast for FY2018 is driven by changes in profit before tax (HC) and
certain other one-off items outlined below.
One-off deferred tax benefits of $358.4M were recorded primarily as a result of the formation of a new tax
consolidated group. The listing on the ASX and consequent election to form a new tax consolidated group
resulted in an increase in the tax base of group assets based on the amount subscribed by investors under
the IPO. This increase will provide additional tax depreciation deductions to the Group in future years and
required the recognition of a one-off deferred tax benefit of $345.5M during FY2018. The Prospectus forecast
for FY2018 included an expected deferred tax benefit arising from tax consolidation of $226.1M. The higher
than forecast tax benefit recorded due to entry into the tax consolidations regime was based on further work
conducted since the IPO that resulted in higher estimated valuations of assets in the business on the IPO
and tax consolidation date.
The effective tax rate excluding the one-off deferred tax benefit was 28.1%. This varies from the standard
corporate tax rate of 30% due to $6.0M of adjustments made to prior period tax provisions and liabilities
based on adjustment of the provisions and liabilities during FY2018.
5. Underlying
Net Profit After
Tax (RC)
The Underlying Net Profit After Tax (RC) of $293.0M is lower than FY2017 primarily due to the decrease
in refining earnings. The final result exceeds the previous guidance update primarily due to the fair value
adjustment of properties with respect to Viva Energy REIT recorded in share of profit of associates of
$16.6M, gain on disposal of PP&E of $10.4M and the impact on changes in FX and oil derivatives of $6.4M.
6. Significant
one-off items
Significant one-off items during the period included $20.7M in recoveries of capital expenditure incurred
in relation to upgrading the Shell brand and visual identity of retail service stations. This is offset by
management fees of $15.3M paid up until the IPO, $2.9M of stamp duty incurred for the IPO, as well as
transaction and restructuring costs.
Summary Balance Sheet
A$M
1. Working capital
2. Property, plant and equipment
Intangible assets
3. Investment in associates
4. Net debt
Finance lease liability
5. Long term provisions, other assets and liabilities
6. Net deferred tax asset/(liability)
7. Total equity
FY2018
Actual
268.0
1,471.3
432.5
664.9
0.2
(50.8)
(143.6)
136.6
2,779.1
FY2017
Actual
306.0
1,408.3
384.7
628.6
(74.6)
(50.6)
(141.5)
(226.1)
2,234.8
Difference
(38.0)
63.0
47.8
36.3
74.8
(0.2)
(2.1)
362.7
544.3
14
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018
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Summary Balance Sheet Analysis
1. Working capital Working capital decreased primarily as a result of the overall net effect of a decrease in average benchmark
crude and refined product prices of A$5.3/BBL between December 2017 and December 2018.
2. Property, plant
and equipment
(PP&E)
Property, plant and equipment relates to freehold terminal property, leasehold retail and terminal
improvements, plant and infrastructure such as tanks and pipelines held at terminals, airports and retail sites
and the Geelong Refinery land and equipment.
Property, plant and equipment increased during the year as a result of capital expenditure of $241.3M offset
by depreciation of $114.7M, transfers of $50.9M to intangible assets relating to the JDE ERP system and
$12.7M of disposals. A breakdown of capital expenditure by segment is outlined below.
A$M
a. Retail, Fuels and Marketing
b. Refining
c. Supply, Corporate and Overheads
FY2018
Actual
45.9
84.5
110.9
241.3
FY2017
Pro Forma
76.0
52.8
104.8
233.6
Difference
(30.1)
31.7
6.1
7.7
a. Retail, Fuels
and Marketing
Retail, Fuels and Marketing capital expenditure is lower than both FY2017 Pro Forma
and the Prospectus forecast for FY2018 predominantly due to progress of the tank
replacement program and a lower number of retail site developments completed
compared with the prior period.
b. Refining
Refining capital expenditure in 2018 at $84.5M was higher than both FY2017
Pro Forma and the Prospectus forecast for FY2018, primarily due to higher than
expected costs relating to the turnaround on the secondary crude distillation unit
and the associated upgrade of the unit furnace. The total spend included significant
growth projects such as the Bitumen Import/Export Facility Project to enable
additional bitumen production and a new 25ML gasoline tank to enable more
efficient export logistics.
c. Supply,
Corporate
and Overheads
Supply, Corporate and Overheads capital expenditure is higher than the FY2017 Pro
Forma and the Prospectus forecast for FY2018 as a result of higher than expected
capital expenditure associated with the completion and capitalisation of the
replacement Enterprise Resource Planning (ERP) system.
3. Investment
in associates
This includes Viva Energy’s investment in the Viva Energy REIT, Liberty Oil and Westside Petroleum (the latter
being acquired during FY2018). Share of profit/(loss) from associates is recorded against this investment
offset by distributions or dividends received.
Investment in associates increased compared with FY2017 primarily due to the acquisition of a 50% equity
stake in Westside Petroleum for $14.9M and the share of profit from Viva Energy REIT associated with fair
value gains on investment properties that are not part of distributions received.
4. Net debt
Net debt relates to Viva Energy’s Revolving Credit Facility (RCF), which is used as a working capital facility to
fund fluctuations in working capital, net of cash in bank. Viva Energy does not hold any long-term structural
debt. Net debt drawn for the full year was close to nil driven primarily by the change in working capital and
the management of stock levels throughout the second half of the year.
5. Long term
provisions,
other assets
and liabilities
This predominantly relates to: (i) long-term provisions associated with asset retirement obligations required
by accounting standards; (ii) long-term environmental provisions; and (iii) provisions associated with lease
straight-lining on lease obligations with Viva Energy REIT. Long term provisions, other assets and liabilities
have remained relatively stable between FY2017 and FY2018.
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Operating and financial review continued
Summary Balance Sheet Analysis continued
6. Net deferred
tax asset/
(liability)
Net deferred tax liabilities relate to the tax effected difference between the carrying value of assets and
liabilities recorded under accounting and those recorded for tax purposes.
One-off deferred tax benefits of $358.4M were recorded in profit and loss primarily as a result of the formation
of a new tax consolidated group. The remaining increase in net deferred tax assets of $4.3M was due to normal
movements in deferred tax due to origination or reversal of temporary differences between taxable income
and profit during the year, along with movements posted directly to equity or other comprehensive income.
This resulted in the net deferred tax liability of $226.1M at 31 December 2017 being replaced by a net deferred
tax asset of $136.6M at 31 December 2018.
7. Total equity
Total equity increased by the NPAT (HC) of $579.6M for the period, $26.0M associated with the IPO reserve
offset by $2.7M of other comprehensive income and a capital return and dividend of $58.6M completed
pre-IPO to return capital relating to certain surplus properties to the then sole shareholder of the Group,
Viva Energy B.V. As a result of the IPO transaction, the share capital was adjusted to reflect the common
control transaction that occurred.
Summary Statement of Cash Flows
A$M
Underlying EBITDA (RC)
FY2018
Actual
528.9
FY2017
Pro Forma
634.3
Difference
(105.4)
(8.7)
(28.9)
65.4
15.6
(24.6)
653.1
(120.7)
(86.6)
445.8
(233.6)
26.7
32.8
271.7
(84.9)
3.6
(1.9)
(5.4)
26.5
(167.5)
266.3
(8.9)
89.9
(7.7)
(9.2)
4.7
77.7
Net inventory gain/(loss)
Lease straight-lining
Share of profit of associates
Net gain/(loss) on disposal of PP&E
Revaluation gain/(loss) on FX and oil derivatives
Profit before interest, tax, depreciation and amortisation (HC) before
significant items
Total Underlying EBITDA (RC)
1.
2.
3.
4.
Decrease/(increase) in inventories
Decrease/(increase) in receivables
Increase/(decrease) in payables
Increase/(decrease) in provisions
Changes in working capital
5. Non-cash items in profit before interest, tax, depreciation and
amortisation
Operating free cash flow before capital expenditure
Capital expenditure
6. Proceeds from sale of PP&E and intangibles
Dividends received from associates
Net free cash flow before financing, tax and dividends
7. Significant one-off items
8.
Finance costs
Income tax instalments
Net cash flow before borrowings
Net drawings/(repayment) of borrowings
Net cash flow
Opening net debt
Amortisation of capitalised borrowing costs
Closing net debt
Change in net debt
16
(93.6)
(25.3)
63.5
10.2
1.9
485.6
(46.1)
(83.5)
299.6
(24.4)
145.6
(95.5)
535.7
(241.3)
17.5
37.5
349.4
35.1
(28.0)
(280.1)
76.4
(132.5)
(56.1)
(74.6)
(1.6)
0.2
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018
Summary Statement of Cash Flows Analysis
1. Increase
in inventories
Inventory increased as a result of an increase in stock levels from December 2017 to December 2018
after reducing from the peak at June 2018 offset by average benchmark crude and refined product prices
declining by A$5.3/BBL between December 2017 and December 2018. The Prospectus assumed no
movement in benchmark crude and refined product prices and stock levels in line with typical target levels.
2. Increase
in receivables
3. Increase
in payables
Receivables increased as a result of growth in commercial volume, which is typically sold to large commercial
customers on payment terms of up to 30 days offset by a decrease in average benchmark crude and refined
product prices of A$5.3/BBL between December 2017 and December 2018. The Prospectus assumed no
movement in benchmark crude and refined product prices. The movement in receivables has been adjusted
to account for significant items totalling $52.0M and $53.2M of the non-cash distribution of surplus land
assets made in 1H2018 that were in receivables at the beginning of the period.
Payables increased as a result of increased purchases on terms that align with commercial customer terms
offset by a decline in benchmark crude and refined product prices of A$5.3/BBL between December 2017
and December 2018 as well as higher purchases in the months of December 2018 compared with December
2017. Viva Energy aims to manage volume growth in the commercial segment on a working capital neutral
basis by matching purchasing basis with customer terms. The Prospectus assumed no movement in
benchmark crude and refined product prices and stock levels in line with typical target levels.
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4. Decrease
in provisions
This relates to cash settled historical long-term employee bonus schemes, payment of annual and long
service leave entitlements, settlement of environmental provisions and change in lease straight-lining
provisions. This is consistent with Prospectus assumptions.
5. Non-cash
items
Profit before interest, tax, depreciation and amortisation (HC) before significant items includes certain
non-cash items not excluded through movements in working capital such as share of profit of associates of
$63.5M, net gain/(loss) on disposal of PP&E of $10.2M, unrealised gain on derivatives of $23.9M and offset by
other minor items totalling $2.1M.
6. Proceeds from
sale of PP&E
and intangibles
7. Significant
one-off items
8. Income tax
This relates to the sale of two freehold sites that were formerly retail service stations and have since been
closed and remediated.
In addition to the significant one-off items outlined in the Summary Statement of Profit and Loss Analysis
on page 14, this item includes recoveries from Shell associated with the settlement of claims relating to
previously incurred Clyde Terminal Conversion Project and other recoveries of $73.0M offset by pre-IPO
management fee expenses of $15.3M, investment in Westside Petroleum and related loans of $18.4M and
other transaction related costs of $4.2M.
Income tax payments included a $116.1M payment in respect of settlement of the tax expense for the year
ended 31 December 2017, which was paid on 1 June 2018 along with lodgement of the tax return for the
same period. A $117.0M payment was outlined in the Prospectus. When the final return was lodged, the final
payment was $116.1M. That payment was made in addition to total monthly tax instalments of $164.0M for
the year ended 31 December 2018, which took total payments for the year to $280.1M. Tax instalments made
during the year were based on prior year assessments before accounting for the net inventory gain/(loss) and
the impact of tax consolidation. As a result the Company expects a refund of $78.4M upon lodgement of the
tax return for FY2018.
Business risks
Viva Energy’s Enterprise Risk Management (ERM) Framework and related risk management policies and procedures are designed to
identify, assess, monitor and manage risk and, where appropriate, keep relevant stakeholders informed of material changes to the
Company’s risk profile.
Viva Energy maintains a strategic risk register to identify and manage risks that could materially impact the achievement of its
business strategy and financial performance. The Audit and Risk Committee, HSSEC Committee and the Board maintain oversight
over the management of material business risks.
The material business risks that could adversely affect the achievement of Viva Energy’s financial prospects are outlined below. They
are not listed in any order of significance.
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Operating and financial review continued
Risk
Description
Mitigation
Viva Energy relies on a complex supply chain, which
can be negatively impacted by a range of events
including extreme weather, accidents, breakdown
or failure of infrastructure, and interruption of power
supply. Disruption to any part of Viva Energy’s
supply chain could materially impact Viva Energy’s
operating and financial results.
The Geelong Refinery may experience or be subject
to mechanical failures, equipment shutdowns, major
accidents and other events that disrupt operations.
Any such event may have a material adverse impact
on refining capacity and revenues.
Viva Energy is subject to a wide range of legislative
and regulatory obligations and operates a number
of facilities under various permits, licences and
approvals (Regulatory Approvals). A failure to
comply with legislative requirements or the
conditions of Regulatory Approvals may cause
damage to Viva Energy’s brand and reputation,
could result in fines and penalties and/or loss of
applicable Regulatory Approvals, which would
adversely affect Viva Energy’s financial performance.
Furthermore, changes in laws or the conditions of
Regulatory Approvals could materially impact Viva
Energy’s operations and financial performance.
Viva Energy manages operational risk through
a comprehensive Health, Safety, Security and
Environmental (HSSE) management system. The
Geelong Refinery has a proactive monitoring,
inspection and preventative maintenance program
to manage the risk of HSSE incidents and unplanned
plant outages. Supply risk is managed through the
maintenance of minimum stock levels, due diligence
assessments on shipping and road transport
providers and through alternative supply options.
Viva Energy also maintains insurance coverage for
major events and supply interruptions.
Viva Energy proactively manages these risks through:
• a compliance program (incorporating the Viva
Energy Code of Conduct, policies and procedures,
staff compliance training and audits);
• detailed operating procedures, standards, training,
audit and assurance, to ensure operational sites
comply with all applicable requirements; and
• monitoring existing regulatory requirements and
proposed changes and engaging with regulatory
bodies and lawmakers both directly and through
industry bodies to ensure that it is aware of
proposed changes and has an opportunity to
participate in consultation regarding proposed
changes in the law.
Viva Energy is exposed to the risk of price
movements in global hydrocarbon pricing,
particularly in respect of the refining margin
earned by the Geelong Refinery.
Viva Energy manages commodity price exposure
through the active monitoring of commodity price
exposure, hedging and the purchase or sale of swap
contracts up to 36 months forward.
Operational and
supply chain risks
Compliance and
regulatory risk
Commodity
price exposure
Health, safety,
security &
environmental
(HSSE) risks
Viva Energy actively manages HSSE risks through
its comprehensive HSSE control framework and
management system. The HSSE management system
is supported by a number of policies, procedures
and standards designed to ensure that HSSE risks
are either eliminated or reduced so far as reasonably
practicable. A risk-based audit and assurance
process is in place, which reviews facilities and
critical activities against the HSSE management
system and legislative requirements. HSSE
performance is a key performance indicator that
is actively measured and reported to the Board.
Viva Energy manages these risks through its
contractual rights, through assurance activities
carried out in relation to the manner in which these
parties undertake their business activities with Viva
Energy, crisis management exercises and regular
engagements with representatives of these parties.
The processing, transportation and storage of crude
oil and petroleum products, and the operation of
the Geelong Refinery and fuel storage facilities,
includes inherently hazardous and dangerous
activities. A major incident could result in injury
or fatality and/or damage to the environment.
There is also a risk of smaller spills and leaks of
petroleum and crude oil to the environment, giving
rise to liabilities to Viva Energy for clean-up and
remediation costs.
Key strategic
relationships
and third party
branding
Viva Energy has a number of key relationships in
relation to its business and operations, including with
Coles Express, Shell, Vitol and Viva Energy REIT. A
material deterioration in the nature of Viva Energy’s
arrangements with these parties or a material decline
in the performance of these parties or their reputation
or brand has the potential to negatively impact the
financial performance of Viva Energy.
18
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Climate change
Climate change risks include a decline in demand
for Viva Energy’s products due to regulatory or
technical changes in response to climate change,
increased operating costs arising from regulatory
responses to reduce greenhouse gas emissions
(such as a price on carbon) and physical impacts
on our assets.
Liquidity and
financing
Refinery margin
exposure
Exchange rate
Viva Energy has substantial working capital
requirements due to the need to purchase large
shipments of crude oil and refined products. Viva
Energy relies on banks and supply and trade
financing arrangements to provide working capital
funding. Adverse changes in Viva Energy’s relations
with providers of funding or in financial markets
which reduce its access to, or increase the cost
of, funding, could adversely impact Viva Energy’s
financial position.
The Geelong Refining Margin (GRM) is based
on the difference between the value of the refined
products that the Geelong Refinery produces and
the cost of the crude oil and feedstock it consumes
to do so. Refinery margins are affected by a range
of factors including a decline in regional demand
for refined products, increased refining capacity
and international freight costs and exchange rate
fluctuations. A low GRM can materially impact
the earnings of the Geelong Refinery.
Viva Energy purchases crude oil, feedstock and
finished products in US dollars and sells its products
in predominantly Australian dollars. Fluctuations in
the AUD/USD exchange rate may negatively impact
Viva Energy’s earnings and cash flow.
Viva Energy manages regulatory risks by monitoring
potential regulatory changes and participating in
consultation processes either directly or through
industry associations. In regard to a potential fall
in demand, Viva Energy actively monitors industry
forecasts and technological developments and Viva
Energy’s longer term strategy involves diversifying its
product offering by growing exposure to convenience
retail to meet changing market demands.
Viva Energy manages liquidity risk via a framework
that includes maintaining sufficient cash reserves,
along with access to working capital funding
sources via a syndicated financing facility, a range
of trade finance facilities, actively monitoring of
cash flow, management of accounts receivable
and insurance coverage.
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Exposure to refining margin risks are managed
through inventory planning to optimise refining
margin performance, programs to improve operational
availability and reliability and limited hedging activity.
Refining margin movements as a result of regional
market forces are inherent in the refining business
and the activities outlined above are not designed
to completely eliminate this exposure.
Viva Energy operates a hedging program that
is designed to manage the impact of exchange
rate fluctuations.
Credit risk
Credit risk is the risk that a customer or counterparty
fails to meet its contractual payment obligations.
Such a default could impact Viva Energy’s revenue
and cash flow.
Viva Energy manages credit risk by undertaking credit
risk assessments on customers, establishing credit
limits and managing exposure to individual entities.
Material decline
in demand for Viva
Energy’s products
A number of external factors, including a decline
in economic activity, the entry of new competitors
into the business segments in which Viva Energy
operates, a change in government policies/regulation
and changes in technology, have the potential to
negatively impact demand for Viva Energy’s products.
If there is a significant decline in demand for Viva
Energy’s products, this could materially impact
Viva Energy’s financial performance.
Viva Energy manages its exposure to this risk by
operating in a range of business segments and with
a range of product offerings, through cost reduction
initiatives to maintain competitiveness and through
its exploration of opportunities associated with
alternative fuels and technologies.
Labour costs and
industrial disputes
Viva Energy’s operations depend upon the
availability and costs of labour and maintaining
good relations with employees and labour unions.
A major dispute with one or more unions
representing Viva Energy’s (or its major contractors’)
employees could disrupt operations at one or more
Viva Energy facility and materially impact
the financial performance of Viva Energy. Similarly,
a material increase in the cost of labour could
impact production costs and profit margin.
Viva Energy manages this risk through proactive
management of its employees. It has in place
employee agreements and conducts regular
benchmarking to ensure that wages and other
benefits offered to employees remain competitive.
In circumstances where a risk of employee or third
party industrial activity is heightened, Viva Energy
develops contingency plans to mitigate potential
impacts on the Company’s operations.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team
Sustainability
Our approach
to sustainability
Our ambition is to be recognised
as one of Australia’s most
respected energy companies
by our shareholders, customers,
business partners, employees,
governments and the community.
Central to achieving this ambition is our
responsibility to undertake operations
and business activities in a sustainable
way that meets the high expectations
of our broad range of stakeholders
that place their trust in us.
• We believe that every incident is
preventable and are committed to
pursuing the goal of no harm to people
and protecting the environment.
We call this ‘Goal Zero’.
• We minimise our environmental
footprint by encouraging improved
energy efficiency, supporting initiatives
to reduce emissions, ensuring highest
levels of water and land management,
and minimising waste.
• We build partnerships with our local
communities to improve outcomes
and generate positive social change.
• We are transparent and foster a
culture of honesty, integrity and
respect for people.
Viva Energy has extensive operations
throughout Australia and provides
around one quarter of the country’s
liquid fuel energy requirements
which Australians rely on to drive our
businesses and go about our everyday
lives. We recognise that we have a
responsibility to operate safely, protect
the communities in which we operate,
preserve the environment that we enjoy,
provide economic growth, meaningful
employment, and operate in an ethical
and transparent way. We also recognise
that through our scale, we have the
ability and responsibility to influence and
show strong leadership in our industry
and the broader business community.
While we are proud of our performance,
we know that standards are changing
and we need to respond and improve.
We actively support and encourage our
people to adopt a process of continuous
improvement in the way we work
across the Company. We have robust
We have a long history of operating
in Australia for over 110 years and
have had a keen focus on key
aspects of sustainability, including
our environmental and health and
safety performance.
management systems, processes and
policies to support our performance,
and we intend to evolve our sustainability
systems and reporting to adopt a
recognised sustainability reporting
framework that will embed broader
sustainability considerations into our
operations and business decision-making.
Our values and ethical
conduct
Our fundamental values of honesty,
integrity and respect for people are
shared by all our employees across
all our operations and are reflected
in our Business Principles, which have
guided the activities of Viva Energy
for many years.
In addition to the Business Principles,
we have adopted a code of conduct
(Code of Conduct) to set clear
expectations of the behaviour of every
employee in every entity in the Viva
Energy Group in the conduct of its
business at all times. The Business
Principles and Code of Conduct apply
to all transactions, large or small, and
are critical to our continued success.
In order to ensure ethical and lawful
business conduct, Viva Energy has
a management system involving
documented policies, training and
internal controls. Viva Energy maintains
an anonymous whistleblower hotline,
and staff are encouraged to report
any breaches of the Code of Conduct.
All disclosures are investigated and
responded to in accordance with the
Viva Energy Whistleblower policy and
applicable law.
Governance
Viva Energy has a comprehensive
governance framework, including
corporate governance policies and
practices, relevant internal controls and
risk management processes designed to
promote the responsible management
and conduct of the Company.
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The Board has adopted the Board
Charter to provide a framework for
the effective operation of the Board.
The Board Charter sets out the
composition, role and responsibilities
of the Board and the authority
delegated by the Board to our Chief
Executive Officer (CEO), management
team and Board Committees.
The Board’s role is to provide strategic
guidance and effective oversight
of management performance in
implementing the Company’s strategies,
business plans and values. The Board has
reserved for itself certain matters as set
out in the Board Charter. These include:
• defining Viva Energy’s purpose and
approving strategies, budgets, major
capital expenditure and business plans;
• appointing the CEO and other
members of senior management,
and evaluating their performance; and
• overseeing management in its
implementation of our business
model, achievement of strategic
objectives and instilling Viva Energy’s
values generally.
The Board oversees our sustainability
approach, with the Board’s HSSEC
Committee assisting with governance
and monitoring of Health, Safety,
Security, Environment (including product
quality) and Community matters.
Risk management
Identifying, understanding and managing
risks across our operations is critical for
our business to operate effectively and
provide protection to our employees,
communities and the environment.
We systematically and comprehensively
assess the consequence of risk in areas
such as health and safety, environment,
finance, reputation and brand, legal
and compliance, and social and
cultural impacts.
Viva Energy’s Enterprise Risk
Management Framework and related risk
management policies and procedures
are designed to identify, assess, monitor
and manage risk and, where appropriate,
keep relevant stakeholders informed
of material changes to our risk profile.
The Board considers risk management
fundamental and pertinent to the
success of the Company and takes
ultimate responsibility for its oversight
and stewardship. Notwithstanding,
risk oversight and management is a
responsibility shared by all employees.
Stakeholder engagement
Stakeholder engagement is fundamental
to the way we do business. Ongoing
and sustainable operations are only
achievable through working with our
employees, customers, community,
industry and government.
We have a number of programs and
processes through which we regularly
enable communication with shareholders,
customers, employees, business partners,
government and regulators and our local
communities. We do this through regular
meetings and written communications,
ASX announcements, investor briefings,
traditional and social media, website
updates, community newsletters and
24-hour phone lines and emergency
information. We have specific community
engagement programs around a number
of our major facilities and a comprehensive
employee engagement program.
Environment
We are environmentally
responsible across all our
operations.
We place the highest priority on the
environment and the communities
where we operate and are committed
to continued improvement of our
environmental performance and
reducing the environmental footprint
of our operations. We have strong
processes and systems in place to
reduce the risk of environmental
incidents and aim to reduce our
environmental footprint more generally
by reducing the energy and emissions
intensity of all our operations.
All of Viva Energy’s operations are
conducted under our health, safety,
security and environment management
system, which ensures that operational
risks are identified and appropriate
controls and procedures in place.
Our facilities have site-specific
environmental management systems
that identify applicable legislative
requirements, environmental risks
and respective control measures.
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Environmental performance
Viva Energy’s major operations, including
the Geelong Refinery, terminals, bitumen
plants, pipelines and lubricants facilities,
typically operate under environmental
licences issued by various regulatory
bodies. These licences generally require
that the discharge of certain contaminants
to air and water be within specified levels.
In 2018, there were a number of minor
incidents that resulted in breaches of
site environmental licence conditions
that were reported by Viva Energy to
the applicable environmental regulator.
These did not result in significant
environmental impact, and we continue
to take steps to reduce the likelihood
of such incidents occurring.
We aim for ‘No Product to Ground’,
and measure our performance against
this objective by tracking the number
of spills that occur within the operational
boundary of our facilities and road
transport operations. These are recorded
as loss of primary containment (LOPC)
events. Where there is a LOPC event
that reaches the natural environment,
this is also recorded separately as a spill
to the environment.
In 2018, all significant spills and
environmental incidents were recorded
and reported as required to the relevant
environmental regulator. Two of the
three recorded spills to the environment
were related to road transport incidents
involving our hired transport carriers.
No Product to Ground Performance Data
2016
2017
2018
Loss of Primary Containment > 100kg
Spills >100kg to the environment
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Climate change and energy
Viva Energy recognises the scientific
consensus on climate change and
supports action that will help Australia
meet its carbon reduction commitments
in a sustainable way.
As a manufacturer and supplier of
hydrocarbon derived products, we
recognise that we have an important
role to play, and that it is important
for the sustainability of our business
to understand the opportunities and
risks associated with climate change
and how to incorporate those into our
business strategy. We acknowledge the
recommendations of the Task Force on
Climate-related Financial Disclosures
and are committed to reviewing how
we can integrate relevant aspects into
our reporting and risk management
framework. We will provide an update
on our progress in next year’s report.
The third spill was as a result of historical
third party damage to the Mascot fuel
pipeline in the vicinity of Sydney Olympic
Park. Upon detection, the leaking
pipeline was immediately isolated so that
it could be repaired and environmental
clean-up undertaken. The extent of the
spill was contained to the immediate
proximity of the pipeline and no further
environmental impacts were sustained.
Viva Energy is committed to protecting
air quality by managing emissions from
our operations. We routinely monitor
our emissions to identify opportunities
for improvement, minimise the risk
of any environmental impacts, and
regularly report our performance to
the appropriate authorities, including
submission of National Pollutant
Inventory reports.
In 2018, Viva Energy received a small
number of regulatory sanctions relating
to offences under environmental
regulation that occurred in previous
years. Any regulatory breaches are taken
very seriously across the Company. Our
systems are directed at reacting quickly
to minimise any impact and to work
constructively and transparently with
authorities. A summary of the regulatory
sanctions received in 2018 is set out in
the environmental performance section
of our Directors’ Report.
Viva Energy recognises the scientific
consensus on climate change and supports
action that will help Australia meet its carbon
reduction commitments.
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Figure 1 – Viva Energy’s greenhouse gas emissions from operations
(tonnes CO2-equivalent)
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
2015–16
2016–17
2017–18
Scope 1 Emission (t CO2-e)
Scope 2 Emission (t CO2-e)
Greenhouse gas emissions
Viva Energy reports its greenhouse
gas, energy consumption and energy
production under the Australian
Government’s National Greenhouse
and Energy Reporting Act 2007 and
appropriate guidelines. The data we
provide is published annually through the
Clean Energy Regulator reporting system.
Our greenhouse gas emissions for the
last three reporting years are set out in
Figure 1 above. Scope 1 Direct Emissions
are from energy sources owned and
controlled by Viva Energy (for example,
fuel consumption, fugitive emissions
and other minor emission sources), and
Scope 2 Indirect Emissions are generated
from the consumption of purchased
energy (for example, electricity required
for the running of Geelong Refinery
and our distribution network). This data
includes all of Viva Energy’s subsidiaries,
contractors and subcontractors within
our operational control.
Viva Energy’s greenhouse gas emissions
over the last three reporting periods
have remained relatively stable and
emissions from the Geelong Refinery,
which account for 96.3% of our total
greenhouse gas emissions, are within the
statutory emission baseline set for the
facility by the Clean Energy Regulator.
Despite this, we recognise that we have
opportunities to reduce our emissions
intensity and improve energy efficiency,
and allocate resources to progress
initiatives to drive improvements across
all the Group’s operations. Recent
examples include:
• In May 2018, Geelong Refinery
upgraded one of its Crude Distillation
Unit furnaces, which has reduced the
unit energy consumption, along with
improved process safety and extra
processing capacity.
• In December 2018, Viva Energy
signed a long term Power Purchasing
Agreement (PPA) with Acciona, the
operator of the Mt Gellibrand Wind
Farm, one of Victoria’s newest and
largest wind farms near Colac, 65km
west of Geelong. The agreement,
which is a financial contract, is for
approximately 100GWh per annum
representing around a third of Viva
Energy’s Geelong Refinery’s annual
electricity needs. The agreement
underwrites renewable energy
production at the Mt Gellibrand Wind
Farm and provides a level of certainty
on energy pricing over the long term,
while supporting a renewable energy
source local to Geelong.
• At our Pinkenba Terminal in Brisbane,
we store bulk lubricants in horizontal
tanks that are gravity loaded, rather
than pumped in from the bottom of
the tank, which reduces energy costs
and increases operational efficiencies.
In 2018, the facility introduced the
bespoke electric container lifter that
minimises the need for emission
control, forced ventilation and
potential occupational noise exposure
(associated with diesel engines).
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Waste program
Viva Energy has a dedicated waste
management program that seeks to
eliminate, reduce, reuse or recycle waste
and does so through a waste hierarchy
process to extract the maximum practical
benefits from products and to generate
the minimum amount of waste. This
program includes making improvements
to our waste reporting to enable better
data analysis, so that we can better
understand the wastes generated across
all of our operations and identify where
improvement opportunities exist.
Waste management practices at Geelong
Refinery are well established. Where
possible, by-products are reused, either
within the refinery or by other industries.
In collaboration with Barwon Water,
Geelong Refinery optimises wastewater
use and recycling to significantly reduce
the consumption of potable water. In the
2017–18 financial year, the refinery used
1,179,586kL of recycled water, which
represents 98% of water consumption,
and 100% of all wastewater of the
refinery was sent to the Barwon Water
Northern Water Plant for recycling.
In 2018, Viva Energy continued its
commitments with the Australian
Packaging Covenant (APC) to reduce
the impact of our lubricants packaging
We are constantly reviewing consumer
trends, technological advances and
engaging stakeholders in the future
of transport energy and fuels.
Biofuel, which can be blended with
traditional fuels to be used in transport
applications, is produced from organic
matter (biomass), which can be from plant
materials and animal waste. Depending
on the production method and distance
of transport, its use may assist in the
reduction of carbon emissions. Viva
Energy has been a supplier of biofuels
for over a decade with Ethanol and Bio-
Diesel blending facilities in Melbourne,
Sydney, and Brisbane.
on the environment. In 2019, our key
projects will include the trialling of closed
loop collaborations with business-to-
business customers on empty lubricant
packaging collection and recycling, and
working closely with operations in both
our Queensland and Western Australia
facilities for opportunities to further
recycle bulk packaging wastes.
Embracing new energy
options
At Viva Energy, we are constantly
reviewing consumer trends, technological
advances and engaging stakeholders in
the future of transport energy and fuels.
This includes the emergence of new
technologies such as electric vehicles,
hydrogen, biofuels, fuel additives, LNG
and trends in consumer mobility.
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Safety
Safety is a deeply held value
at Viva Energy.
We believe every incident is preventable
and are committed to pursuing the goal
of no harm to people and protecting the
environment. We call this ‘Goal Zero’.
To achieve this, we manage safety
in a systematic way, starting with our
people, where we develop their safety
leadership skills and reward their safety
successes. We believe that providing
a safe workplace and ensuring safe
outcomes is an ethical responsibility,
and also believe that our people at
all levels of the organisation are the
solution to any challenge and hold the
resilience our safety systems need to
effectively function.
Our HSSE control framework and
management system is the foundation
of our approach to HSSE. Viva Energy’s
principal ambition is to deliver safe and
reliable operations, which can only be
achieved through effective management
of both personal and process safety
matters, as well as focused asset integrity
management and proactive health and
wellness initiatives.
In 2018, these continuous improvement
initiatives included our annual
Celebrating Safety Week program,
a targeted early intervention program
to identify hazardous manual handling
risks in aircraft refuelling operations
and a refreshed safety leadership
program in our Supply Chain business.
During our Celebrating Safety Week,
employees, contractors and external
partners took part in exercises
designed to challenge and promote
individual commitments to personal
safety awareness and improvements.
We dubbed this call to action ‘Be the
Solution’, reinforcing our commitment
at all levels of the organisation to
Goal Zero.
Early intervention program
A targeted early intervention program aimed at reducing musculoskeletal
injuries in our aircraft refuelling operations was trialled in 2018 with excellent
results. The development of this program was approached in a multifaceted
way, reviewing equipment, improving recruitment screening, refining
procedures and implementing a movement program aimed at engaging
the workforce in ownership of their physical health, both in and outside the
workplace. This has resulted in a significant decrease in manual handling-
related injuries in this area of the business.
This activity was recognised in the WorkSafe Victoria Excellence Awards,
with the Viva Energy Health representative who steered the program receiving
an Excellence in Personal Injury Management (Self Insurance) Award in late
2018. The program is now being implemented more broadly across the
business in 2019.
Health and safety performance
The total recordable injury rate (per
million hours worked) for 2018 was 5.77,
with 36 recordable injuries (employee
and contractor) and seven lost time
injuries.2 This was an increase over the
prior year; however the lost time injury
frequency rate (which measures the
number of recordable injuries resulting
in lost time, relative to the total hours
worked) remains low compared to similar
industries nationally.
Tragically, one of our hired carrier
contractors experienced a fatality in
March, when a fuel tanker transporting
product on Viva Energy’s behalf in
Queensland was struck by a third party
light vehicle, resulting in the ignition
of the vehicle’s contents and the fatality
of the tanker driver. Viva Energy has
worked closely with the transport
company to support them and their
people in response to this incident.
We continue to work with research
bodies and industry to further improve
vehicle safety technologies and road
standards, with the aim of helping to
prevent such events in future.
Our process safety framework focuses
on safe manufacturing, processing
and distribution of our products, and
this starts with the basic premise of
keeping product safety contained in
the relevant vessel, tank, pipeline and
unit of transportation. Particular focus is
given to the prevention and mitigation
of process safety events, given they have
the potential to result in major incidents
such as fire and explosion, which have
the potential to threaten life.
The principal overarching system that
supports our process safety framework
is the Hazard and Effect Management
Process (HEMP). HEMP is the systematic
hazard analysis process used to identify
hazards, assess the risk of the identified
hazard release scenario and identify the
controls and recovery measures that
need to be in place to manage that
hazard. The HEMP analysis for each
facility is reviewed regularly, via both
internal independent audit and review
processes and by external regulatory
audit. Assurance is conducted on
the critical barriers and reliability and
integrity programs focused around
the critical assets that form barriers
to prevent loss of containment and
process safety events.
Identification and management of
potential major incident scenarios are
particularly important at our major
hazard facilities (MHF), two of which
were recently subject to renewal of
their Safety Cases under the Victorian
MHF regime, which involves extensive
review by the state regulator of the sites’
HEMP and robustness of critical control
management. Both sites successfully
had their licences renewed for a further
five years. In addition, our MHF in
Queensland underwent extensive review
and update of its site HEMP and Safety
Case, involving testing and assessing the
robustness of the control and recovery
measures across the site.
2. Criteria definitions used are in line with US OSHA guidelines.
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During 2018, the business experienced
four Tier 2 process safety incidents
and no Tier 1 process safety events
(which are the more severe events).
The classification standard used for
process safety events of this nature is
the American Petroleum Institute (API)
system, which is used internationally in
the oil, gas and chemical industries to
drive consistency in chemical release
reporting. This result for 2018 was a
slight increase in the number of API Tier
2 incidents compared with 2017. None
of these events had a material effect on
people or the environment.
During the year we undertook over
1,000 random drug and alcohol tests
of employees and contractors, and
over 300 fitness to work assessments
were conducted. This represents a
more than 50% increase on the
number of fitness to work assessments
conducted in 2017. Such proactive
monitoring forms a critical element
of our risk management framework.
Audit and assurance is a key part of Viva
Energy’s safety program, and to this end,
we undertook 131 independent audits
on sites, assets and our contractors
during 2018, with a particular focus
on the management of the barriers
aimed at preventing major incidents.
This assurance program includes an
extensive road transport audit program,
maritime audits, product quality audits,
asset integrity inspections, emergency
response exercises and critical process
audits. In addition, the business was
subject to 30 independent external or
regulator audits, focusing in particular
on safety and environmental risk
management of our major hazard
facilities and pipelines.
HSSE Performance Measures
Exposure hours (million)
Total recordable cases
Employee
Contractor
2018
2017
6.24
5.55
36
14
22
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13
Total recordable case frequency (TRCF) (per million hours)
5.77
4.51
Lost time injuries
Employee
Contractor
Lost time injury frequency rate (LTIF) (per million hours)
Tier 1 and Tier 2 process safety incidents
7
4
3
1.12
4
5
4
1
0.90
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Health Watch
Australian Institute of Petroleum (AIP, of which Viva Energy is a core member)
funds the independent Health Watch study to monitor the health of petroleum
industry employees. The study underpins the very long-standing commitment
of the industry to the health and wellbeing of their employees.
This internationally recognised research covers over 20,000 past and present
employees during their time in the industry and after they leave or retire
to track what happens to their health. Health Watch is a detailed analysis
of job types, lifestyle influences, and illness and causes of death. The health
of petroleum industry employees is then compared with data for the overall
Australian community.
The study provides valuable insights into the influences on employee health,
and the measurable effects of working in the industry on an employee’s
lifestyle. The findings of the study assist the petroleum industry to develop
workplace policies and programs that are providing safe and healthy
working environments.
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People
We are committed to ensuring
all employees experience a safe,
inclusive, fair and productive
work environment where they
can develop to their full potential.
We recognise that it is our ability
to attract and motivate high calibre
people that will deliver outstanding
business results.
Diversity and inclusion
There are many elements of diversity,
with gender diversity having the most
well researched benefits to organisational
performance and the greatest focus
currently in Australian workplaces and
society. As a consequence, we believe
that achieving gender equality as our first
priority will enable us to make progress
on the other diversity areas in the future.
Current plans for improving indigenous
representation in our workforce will
continue, predominantly through Career
Trackers internship programme and
graduate employment.
Leadership development for all levels of
leadership is an ongoing focus. We utilise
external, globally recognised frameworks
to measure and improve our leadership
effectiveness, which includes developing
inclusive leadership capability to build
highly engaged teams of people with
diverse background and experiences.
Our objective is to improve the
representation of females in all roles
and levels of our business and to ensure
that they are paid equally with their
male counterparts as measured by total
remuneration. We believe a diverse and
engaged workforce enhances team and
organisational performance, improves
our ability to attract and retain the best
talent in the market and supports our
aspiration ‘to be one of Australia’s most
respected energy companies’.
Viva Energy’s gender diversity targets
50% Female representation in the Senior Leadership Group by end 2020
50% New hires to be female
40% Female representation on the Board to be achieved in the longer term
as part of the Board’s succession planning
Gender diversity
Our approach and commitment to
achieving gender diversity is nationally
recognised, with Viva Energy achieving
the Employer of Choice for Women
citation for the second consecutive year
(2018–19), awarded by the Workplace
Gender Equality Agency.
Our Gender Diversity Strategy
and targets for increased female
representation in leadership and
management positions are overseen by
the Board. We ensure our recruitment,
policies, job structures and workplace
culture support the achievement of
these targets by encouraging more
women to join the areas of our business
where we have lower representation.
We have a number of programs
specifically aimed at achieving these
targets, including our ‘Female Emerging
Leaders Program’, flexible working
arrangements, Geelong Refinery Female
Mentor Program and the Geelong
Women’s Network. Our recruitment
target has driven us to try different and
innovative recruitment approaches. An
example of this is our recent recruitment
of 12 female operators at Geelong
Refinery into specifically created part-
time/job-share operator roles. We
achieved this result by changing how we
advertised for the roles, which included
broadening the selection criteria.
Our overall female representation in the
Company increased from 21% to 22%
in 2018 driven by increases in female
representation at Geelong Refinery and
in our supply chain teams.
Gender diversity at Viva Energy
as at 31 December 2018
78%
22%
Overall
group
59%
41%
Senior
leadership
group
58%
42%
New
hires
Male
Female
27
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team Sustainability continued
Female Emerging Leaders
Program
Driven by our aspiration to have
50% of leadership roles being
held by women, we commenced
a program in 2017 designed to
support our emerging female
leaders to maximise their
leadership skills.
We believe that the development
of our emerging female leaders is
an important element in achieving
our aspiration. The program is
five days over 12 months
designed and facilitated by a
well-respected consultant in the
area of gender diversity.
In the two years that the program
has been running, 32 female
emerging leaders from all parts
of the business have moved
through a series of activities,
which are a combination of
observed activities with feedback,
facilitated activities in workshop
style and self-directed activities
and reflection. The observed
activities simulate the challenges
of a senior management role,
and importantly provide the
opportunity for observing and
evaluating target leadership
capabilities. The program is
deliberately targeted at females
only in order to allow the group
to explore their leadership identity,
address specific development
needs of women, and challenge
the unique barriers to
advancement faced by women.
This program is already delivering
results, with 50% of participants
in the 2017 program moving on to
new roles; and the program was
externally recognised in 2018,
winning the Workplace Excellence
Awards (Australian Organisational
Psychologists) Leadership and
Coaching Initiative.
specific circumstances, including
part-time, job-share, time in lieu,
telecommuting, carer’s leave, domestic
violence leave and unpaid leave.
We offer 14 weeks’ full paid parental
leave for primary carers and two weeks’
full paid parental leave for secondary
carers, which is over and above the
government’s paid parental leave
scheme, and offer the Grace Papers
program to support staff through
pregnancy, parental leave and return
to work. Our paid ‘Keeping in Touch’
program ensures that employees who
are on extended parental leave maintain
their connection with the business.
We are proud to be the first company
in Australia to introduce a full-time 12%
superannuation payment for employees
(male and female) on parental leave
and during part-time work periods,
for up to five years from the child’s birth.
Indigenous employment
We are deeply committed to our
contributions to Indigenous employment.
The objectives of our Indigenous
Participation Plan have been to build
skills, and develop and create worthwhile
job opportunities for Indigenous people.
We have focused on our partnership
with Career Trackers, which provides
skills, development and job opportunities
for Indigenous students through their
internship program. In 2018, eight
Indigenous students worked across,
Queensland, Victoria and Western
Australia in various parts of our business.
Flexible working
arrangements
We promote and support flexible working
arrangements. Our culture focuses
on measuring employee performance
through outcomes and deliverables,
rather than time spent in the office.
Our Flexible Working Policy is
designed to create greater flexibility
for our employees who require work
arrangements to suit their circumstances.
We offer a variety of arrangements and
benefits to support our employees’
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 S
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Communities
We are committed to building
strong relationships and making
a positive difference in local
communities across our national
operating footprint. We believe
this is important for employee
attraction and engagement,
and also meets the expectation
of the broader community and
our stakeholders.
We implement our Community Program
by working with our people through our
Community Ambassadors, within our
communities through our partnerships
and volunteering and through our
business practices with support for social
enterprises and procurement practices.
Our people can participate by donating
from their salary, volunteering or
raising funds in teams for a number of
community partners. In 2018, Viva Energy
continued its participation in Good Deeds
Week, where more than 850 Viva Energy
employees across Australia donated
over 1,000 hours to participate in 1,054
good deeds, including donating life-
giving treatments to the Australian Blood
Bank and Australian Red Cross, knitting
blankets, planting trees and fundraising.
Geelong community
programs
In recent years our focus has been on
building stronger relationships with
the local Geelong community, which
has been impacted by the closure of a
number of manufacturing facilities in the
region, and where we have a significant
presence through our refining business.
We have partnerships with a range of
local community organisations including
Northern Futures, headspace, and
Geelong Football Club (sponsoring their
inaugural AFL Womens (AFLW) team
and their NextGeneration program). We
have a Geelong-specific sports program,
supporting a number of local sporting
clubs and a Club Legends initiative,
where we reward and celebrate the
unsung sporting volunteers in the wider
Geelong region. We also engage Gen
U (a social enterprise) at our Geelong
Refinery to run the refinery cafeteria
and provide gardening services.
1,054
Good deeds
850+
Employees participating in
our Community Program
$375,421
Raised through Double my
Donation and employee
fundraising
Our people can participate by donating from
their salary, volunteering or raising funds in teams
for a number of community partners.
29
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team Sustainability continued
Indigenous Participation Plan
We respectfully work together with
Indigenous peoples to help achieve
their community aspirations.
change. Our Indigenous Participation
Plan commitments also align directly
with the three pillars of our Community
Program: our people, our local
communities, and our business.
the Council for Aboriginal Alcohol
Program Services (CAAPS), National
Aboriginal Sporting Chance Association
(NASCA), and Koorie Heritage Trust. We
are also members of Supply Nation.
Our Community Program and Indigenous
Participation Plan share a common
goal: to be valued by our people, local
communities and customers for our
genuine efforts towards positive social
We support and participate in a number
of projects that address significant
community challenges, including
through our partnerships with the
Cathy Freeman Foundation (CFF),
We are the proud manufacturer and
supplier of Low Aromatic Fuel (LAF) into
Northern Australia, which helps combat
petrol sniffing in regional communities.
Community Program update
Our efforts are directed to mental
health, Indigenous participation and
substance misuse. Below outlines
our 2018 achievements.
1,054 Good Deeds
by 850 employees,
raising $10,000+.
Geelong Football Club
Supporting women’s
football through AFLW
premier sponsorship.
2,800+ young people
supported by Viva
Energy programs.
$375,421 raised
by employees through
Double My Donation
and team fundraising.
This includes the Viva
Energy contribution.
Koorie Heritage Trust
three-year partnership
announced as the
Principal Corporate
Supporter for collections,
exhibitions and public
programs.
$100,000
donated to
Australian
Red Cross
to support
drought-affected
Aussie farmers
with a focus on
mental health.
Our people
Donations to community partners
234 employees have donated $106,582 to a range of community partners. This has been
matched by Viva Energy to bring the contribution to $213,165.
Community Ambassadors
Our 40 Community Ambassadors have organised over 50 activities for our people – helping
a range of our community partners.
Team fundraising
$162,256 raised through 22 team fundraising activities, including Viva Energy’s contribution.
Indigenous activities
380 employees were involved in activities to deepen our cultural awareness and competency.
Role Model Grants recipients selected by our staff
Grants to the value of $79,000 were issued to 11 local community organisations.
Our communities
CAAPS
CAAPS numeracy and literacy program has supported 32 clients of school age residents
recovering from substance misuse issues.
This involved over 956 hours of training.
Cathy Freeman Foundation
In our first year of a four year partnership, CFF supported 1,748 young Indigenous people to
remain engaged in education. 428 of our people have participated in CFF activities.
National Aboriginal Sporting Chance Academy
In the first six months of the partnership, NASCA delivered 677 hours of activities, supporting
67 students in western Sydney.
headspace
Annual funding of $200,000 has provided young people 381 participation opportunities for training
and skilling sessions that covered topics including leadership, facilitation and youth mental health
first aid. 21 of our employees have donated 500+ in-kind hours mentoring for young people.
Northern Futures
Annual funding of $40,000 has supported 25 young people to remove financial barriers for
them to participate in education and/or employment opportunities.
Support grass roots sports
10 local Geelong sports clubs sponsored. More than $50,000 in prize money awarded for
our Club Legends Award.
Our business
Indigenous community projects
As part of our renewed contract to supply Low Aromatic Fuel into Northern Australia, we
are well on our way to meeting our commitment of up to $3,000,000 to support Indigenous
community projects.
Member of Supply Nation
Providing options to support Indigenous businesses.
Local suppliers
83% of our suppliers are Australian based.
Customers
Working collaboratively with our customers to support local communities where we both operate.
30
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Economic contribution
Viva Energy makes a significant
contribution to the Australian
economy through the national
scope of our operations,
the products we supply, the
employment we generate,
the local suppliers we support,
and the taxes we pay.
We supply around a quarter of
Australia’s liquid fuel requirements,
keeping the wheels of industry and
the economy moving.
With a workforce of more than 1,200
employees and over 350 contractors,
we annually invest more than $1 billion
in local wages and services. Our local
presence has important flow-on impact
on the broader Australian economy,
with the vast majority of our suppliers
and contractors being Australian based.
Our business also contributes to the
economies of a number of regional
centres, with 36% of our employees being
based in these regional locations. We are a
highly skilled workforce and committed to
supporting young people in the industry.
Nationally we engage nine apprentices, six
of whom are from Northern Futures – an
organisation that supports young people
from low-socioeconomic areas in the
Geelong region.
Total tax contribution
Income tax
Fuel excise
Customs duties
Payroll tax
Fringe benefits tax
Land tax
Government imposts collected by the business on behalf of others:
A$M
280.1
4,103.8
15.5
10.9
0.8
21.7
1,205.3
68.9
5,707.0
GST
PAYG withholding
Total tax contribution
We are proud of our commitment
to manufacturing and recognise the
important role the Geelong Refinery
plays in providing skilled jobs,
apprenticeship opportunities and direct
community support. But refineries in
Australia also play another important
role by contributing to supply diversity
and national fuel supply security. Strong
fuel supply security is characterised
by having diverse sources (local and
imported) of crude oil and finished
products supply, as well as strong
integration into international markets.
Geelong Refinery processes a mix of
imported and local crudes to produce
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around 10% of Australia’s liquid fuel
needs, and is also a key import hub
for additional refined products needed
to satisfy Australia’s growing demand
for products such as jet fuel and diesel.
Viva Energy is a significant tax contributor
via income and payroll tax contributions
and the taxes we collect in the form of
fuels excise and GST. The Australian
Taxation Office’s categorisation of
Viva Energy as a key taxpayer for the
purposes of income tax, excise and GST
illustrate the importance of Viva Energy’s
contribution to the broader tax system.
In 2016, Viva Energy voluntarily adopted
the Voluntary Tax Transparency Code,
under which it makes public disclosures
of its tax position, in addition to
the requirements under its financial
statements. We have made disclosures
for each year since then, which can be
found on in the Investor Centre section
of our website.
Supporting Australia’s economy
Annually invests $1B+
in local wages and sevices.
National infastructure
network of 28 terminals
with over 1.1 billion litres
of storage capacity.
Over 1,200 strong
Australian workforce 36%
based in regional areas.
Proudly supporting
local manufacturing
at the Geelong Refinery
One of four refineries
in Australia.
Viva Energy supplies:
Approximately
1/4 of Australia’s
fuel needs.
1,250+ retail sites
(including Shell,
Coles Express,
Liberty and Westside
Petroleum).
Only manufacturer in Australia of:
Community Program
Our efforts are directed at programs
that support mental health, Indigenous
participation and substance misuse.
avgas
solvents
bitumen
around 48% of the
marine fuel oil market.
around 37%
of jet fuel
nationally.
Supplying
50 airports.
and manufactures
Low Aromatic
Fuel into NT,
QLD and WA.
31
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team Board Members
Robert Hill
LLB, BA, LLD(Hon), LLM,
DPolSc(Hon)
Independent Non-Executive
Director and Chairman
Scott Wyatt
BCA
Chief Executive Officer and
Executive Director
Arnoud De Meyer
MSc.E, MSc.BA, PhD
Management, Hon Phd
Independent Non-Executive
Director
Jane McAloon
BEc(Hons), LLB, GDip
CorpGov, FAICD
Independent Non-Executive
Director
Term of office
Appointed as CEO on
13 August 2014. Appointed
to the Board on 7 June 2018.
Skills and experience
Scott Wyatt has more than
30 years’ experience in the oil
and gas sector and has held
various leadership roles within
Viva Energy’s downstream oil
and gas business (formerly Shell)
including strategy, marketing
(consumer and commercial)
and supply and distribution.
After a long career with Shell
in New Zealand, Australia and
Singapore, Scott relocated to
Australia in 2006 as Distribution
Manager (Australia and New
Zealand) and in 2009 was
appointed General Manager of
Supply and Distribution Australia.
In July 2013, he was appointed
Vice President Downstream
Australia, responsible for the
downstream businesses in
Australia. Scott was appointed
as CEO in August 2014.
Scott is currently a Non-Executive
Director of Viva Energy REIT
(since 2016).
Board Committee memberships
• Member of the Investment
Committee
Term of office
Appointed to the Board
on 18 June 2018.
Term of office
Appointed to the Board
on 18 June 2018.
Skills and experience
Jane McAloon has over 25 years
of business, government and
regulatory experience at senior
executive and board levels across
the energy, infrastructure and
natural resources sectors.
Jane was an executive at BHP
Billiton and AGL. Prior to this, she
held positions in government in
energy, rail and natural resources.
Jane is currently a Non-Executive
Director of Healthscope Limited
(since 2016), Energy Australia
(since 2012) and Cogstate
Limited (since 2017). She is also
a board member of Civil Aviation
Safety Authority and the Port
of Melbourne.
Board Committee memberships
• Chair of the HSSEC Committee
• Member of the Audit and Risk
Committee
• Member of the Investment
Committee
Skills and experience
Arnoud De Meyer is a former
President of Singapore
Management University and
was previously a Professor in
Management Studies at the
University of Cambridge and
Director of Judge Business
School. Arnoud was also
associated with INSEAD as a
professor for 23 years, and was
the founding Dean of INSEAD’s
Asia Campus in Singapore.
Arnoud currently serves on the
board of Singapore Symphonia
Company and he is an
Independent Director of Dassault
Systèmes (since 2005), listed on
the Euronext Paris exchange.
Arnoud previously served as
an independent director for
the Department for Business
Enterprise and Regulatory
Reform (UK) and the Singapore
Economic Review Committee.
He also served on the boards
of Singapore International
Chamber of Commerce and
Temasek Management Services.
Board Committee memberships
• Chair of the Investment
Committee
• Member of the Remuneration
and Nomination Committee
Term of office
Appointed to the Board on
18 June 2018. Formerly an
Independent Non-Executive
Director of Viva Energy Holding
Pty Limited (5 February 2015
to 17 July 2018).
Skills and experience
The Hon. Robert Hill is a
former barrister and solicitor
who specialised in corporate
and taxation law and who
now consults in the area of
international political risk. He has
had extensive experience serving
on boards and as chairman of
public and private institutions,
particularly in the environment
and defence sectors.
Robert Hill was previously
Australia’s Minister for Defence,
Minister for the Environment and
Leader of the Government in
the Senate during his time as a
Senator for South Australia. He
served as Australia’s Ambassador
and Permanent Representative to
the United Nations in New York.
Robert is a former Chancellor of
the University of Adelaide. In 2012,
he was made a Companion of the
Order of Australia for services to
government and the parliament.
Robert is currently Chairman
of the Antarctic Science
Foundation, Chairman of the
NSW Biodiversity Conservation
Trust, Chairman of Cooperative
Research Centre for Low Carbon
Living and Chairman of Re Group
Pty Limited.
Board Committee memberships
• Chair of the Remuneration and
Nomination Committee
• Member of the HSSEC
Committee
• Member of the Investment
Committee
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 B
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Dat Duong
BBA, CFA
Non-Executive Director
Hui Meng Kho
BSc (Chemical
Engineering) (Hon)
Non-Executive Director
Term of office
Appointed to the Board on
7 June 2018. Formerly a Non-
Executive Director of Viva Energy
Holding Pty Limited (1 January
2017 to 17 July 2018).
Skills and experience
Dat Duong is the Head of
Investments for Vitol in Asia
Pacific.
Dat joined Vitol in 2010, prior
to which he was an Associate
Partner at Leopard Capital, an
investment fund focused on
Asia’s frontier and emerging
markets.
Dat has extensive international
investment banking experience,
including with Merrill Lynch in
the Global Energy and Power
Investment Banking Group in
both Hong Kong and Canada,
where he led multiple landmark
downstream oil transactions.
Dat commenced his career at
Esso Imperial Oil in Canada as
a business analyst.
Board Committee memberships
• Member of the Audit and Risk
Committee;
• Member of the Investment
Committee.
Term of office
Appointed to the Board on
18 June 2018. Formerly a Non-
Executive Director of Viva Energy
Holding Pty Limited (23 June 2014
to 17 July 2018).
Skills and experience
Hui Meng Kho is the President
and CEO of Vitol Asia Pte Ltd
and a member of the Vitol Group
Board of Directors. Hui Meng
joined Vitol in 1987 and has been
the head of Vitol Asia since 1999.
Prior to joining Vitol, Hui Meng
was with Esso Singapore,
involved in logistics, planning,
trading and refinery operations.
Hui Meng is currently a director
of Boustead Petroleum Sdn. Bhd.
(formerly BP Malaysia) and on the
Board of Trustees of Singapore
Management University.
Hui Meng was conferred the
title ‘Dato’ by the Ruler of the
Malaysian state of Pahang in 2004.
Board Committee memberships
• Member of the Remuneration
and Nomination Committee;
• Member of the Investment
Committee.
Sarah Ryan
PhD (Petroleum and
Geophysics), BSc (Geophysics)
(Hons 1), BSc (Geology), FTSE
Independent Non-Executive
Director
Term of office
Appointed to the Board
on 18 June 2018.
Skills and experience
Sarah Ryan has almost 30 years
of international experience in
the energy industry, ranging
from technical and operational
roles at a number of oil and
gas companies, to a decade of
experience as an equity analyst
covering natural resources.
Sarah is a Fellow of the Australian
Academy of Technological
Sciences and Engineering
(ATSE), a Fellow of the Australian
Institute of Energy, a Member
of the Australian Institute of
Company Directors, a Member
of Women Corporate Directors
and a Member of Chief Executive
Women. She serves as a
member of the selection panel
of the General Sir John Monash
Foundation, Chair of the Advisory
board of Unearthed Solutions,
and is Deputy Chair of ATSE
Energy Forum.
Sarah is currently a Non-
Executive Director of Woodside
Petroleum Limited (since 2012),
Akastor ASA (since 2014), listed
on the Oslo Stock Exchange and
Kinetic Pty Ltd (since 2016). She
is a former director of Central
Petroleum Limited (from 2017
until 2018) and Aker Solutions
(from 2010 to 2014).
Board Committee memberships
• Chair of the Audit and Risk
Committee;
• Member of the HSSEC
Committee;
• Member of the Investment
Committee.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team
Executive Leadership Team
Scott Wyatt
Chief Executive Officer
Jevan Bouzo
Chief Financial Officer
Daniel Ridgway
Chief Operating Officer
Megan Foster
General Manager, Retail
Scott Wyatt has more than
30 years’ experience in the oil
and gas sector and has held
various leadership roles within
Viva Energy’s downstream oil
and gas business (formerly Shell)
including strategy, marketing
(consumer and commercial)
and supply and distribution.
After a long career with Shell
in New Zealand, Australia and
Singapore, Scott relocated to
Australia in 2006 as Distribution
Manager (Australia and New
Zealand) and in 2009 was
appointed General Manager of
Supply and Distribution Australia.
In July 2013, he was appointed
Vice President Downstream
Australia, responsible for the
downstream businesses in
Australia. Scott was appointed
as CEO in August 2014.
Scott is currently a Non-Executive
Director of Viva Energy REIT
(since 2016).
Prior to joining Viva Energy,
Jevan Bouzo worked at Ernst &
Young in assurance and business
services, where he led assurance
and business improvement
projects for clients in the energy
and retail sectors as well as a
number of ASX-listed companies.
Since joining Viva Energy,
Jevan has overseen corporate
finance, business finance and
credit, treasury and a number of
strategic projects culminating
in his appointment as Chief
Financial Officer.
Jevan is a Chartered Accountant
and has a degree in Bachelor
of Commerce majoring in
Accounting and Finance.
Daniel Ridgway has more than
20 years’ experience in the oil
and gas industry, after starting his
career as a petroleum engineer
in Shell’s upstream exploration
business in the North Sea.
Daniel went on to fulfil a diverse
range of leadership roles across
downstream oil and gas, both in
Australia and overseas.
Prior to being appointed to the
role of Chief Operating Officer at
Viva Energy, Daniel held the roles
of General Manager, Retail and
prior to that General Manager,
Supply Chain.
Megan Foster has over 25 years’
experience in retail across FMCG,
Grocery, Specialty, Food, and
general Retail. Having recently
joined Viva Energy in January
2019, she brings with her
extensive senior executive
experience across Marketing
and Brand, Digital, Sales, Property
and Development, Operations,
Merchandise and M&A.
Prior to joining Viva Energy,
she led the Retail division for
QIC, responsible for the retail
product strategy across Australia
and their 22 Australian assets.
Previously she has held general
management positions with Myer
and Sass and Bide after an earlier
career with Woolworths and
Unilever, and running a highly
successful retail consultancy.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Thys Heyns
General Manager, Geelong
Refinery
Denis Urtizberea
General Manager, Commercial
Jodie Haydon
General Manager, People
and Culture
Lachlan Pfeiffer
General Counsel and
Company Secretary
Denis Urtizberea joined Viva
Energy Australia late 2015,
bringing 25 years of experience
in the oil and gas industry.
He developed a passion for
customer centricity through a
number of diverse sales and
marketing leadership positions,
primarily in the business to
business arena.
Starting his career in a small
subsidiary of Total, moving then
to BP/Castrol Group before
joining Puma Energy and finally
Vivo Energy and Viva Energy
Australia, Denis has had the
opportunity to build a strong
international culture through
negotiating deals in more than
100 countries across the globe.
Jodie Haydon has worked across
all parts of the downstream
business in various Human
Resources roles and has been
part of many projects changing
and shaping the business
during her 20+ years with Shell
and Viva Energy.
Jodie started her career in IT
and project management roles
before moving into human
resources. She worked in London,
with European responsibilities
for IT consulting before moving
back to Australia to lead the
Downstream HR function.
Jodie has a Bachelor of
Economics and postgraduate in
Japanese from Monash University.
Prior to joining Viva Energy in
October 2014, Lachlan Pfeiffer
worked as a corporate lawyer for
Skadden, Arps, Slate, Meagher
and Flom (UK) LLP, based in
London for seven years. Lachlan
started his career in Melbourne
working for Norton Rose
Fulbright (Australia).
Lachlan is a legal practitioner and
holds a Bachelor of Commerce
and a Bachelor of Laws. He is
also a member of the Australian
Institute of Company Directors.
Lachlan is also a Non-
Independent Non-Executive
Director of Viva Energy REIT.
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Thys Heyns has more than 30
years’ experience in the oil and
gas industry. Prior to joining Viva
Energy in February 2015, Thys
was with BP for 28 years in an
international career across four
continents that covered Supply
Chain, Oil Trading and Refining.
Thys is an experienced Refining
executive with his most recent
roles including General Manager
of the 400kb/d BP Rotterdam
Refinery and the 140kb/d BP
Kwinana Refinery in Western
Australia. Prior to that, Thys was
the Commercial General Manager
for BP’s global refining portfolio.
Thys’ academic qualifications
include a Bachelor of Commerce
(Hons) in Accounting and
Economics as well as a Master
in Business Administration.
In addition, he has attended
executive education programmes
at Stanford University, Cambridge
University and Massachusetts
Institute of Technology (MIT).
He has held leadership roles
in various industry associations
and is currently a director of the
Geelong Manufacturing Council.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018About usChairman and Chief Executive Officer’s reportOperating and financial reviewSustainabilityBoard MembersExecutive Leadership Team
Financial report
Contents
Directors’ report
Auditor’s independence declaration
Consolidated statement of profit or loss
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
General Information
Results for the year
1. Revenue from contracts with customers
2. Expenses
3. Segment information
4. Earnings per share
Working capital and cash flow
5. Inventories
6. Cash and cash equivalents
7. Reconciliation of profit to net cash flows
from operating activities
8. Trade and other receivables
9. Prepayments
10. Trade and other payables
11. Short-term borrowings
Long-term assets and liabilities
12. Property, plant and equipment
13. Long-term receivables
14. Goodwill and other intangible assets
15. Provisions
16. Commitments and contingencies
37
58
59
60
61
62
63
64
64
66
66
67
68
70
71
71
71
72
73
74
75
75
76
76
77
77
79
80
Capital funding and financial risk management
17. Financial assets and liabilities
18. Derivative assets and liabilities
19. Long-term borrowings
20. Consolidated net debt
21. Contributed equity and reserves
22. Dividends declared and paid
23. Fair value of financial assets and liabilities
24. Financial risk management
Taxation
25. Income tax and deferred tax
Group structure
26. Group information
27. Business combinations
28. Interests in associates and joint operations
29. Parent company financial information
30. Deed of Cross Guarantee
Other disclosures
31. Post-employment benefits
32. Related party disclosures
33. Auditor’s remuneration
34. Events occurring after the reporting period
Directors’ declaration
Independent auditor’s report
83
84
87
87
88
88
89
90
90
94
94
97
97
98
99
101
102
104
104
107
109
109
110
111
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The Directors present their report, together with the financial report of Viva Energy Group Limited (the Company) and the entities
it controlled (collectively, the Group), for the financial year ended 31 December 2018. The Company was admitted to the Official
List of the Australian Securities Exchange (ASX) on 13 July 2018 (Listing). In connection with its Listing, the Company completed a
corporate restructure, which included the acquisition of Viva Energy Holding Pty Limited (VEH) and its controlled entities. Unless
otherwise stated, the information presented in this Directors’ Report covers the period 1 January 2018 to 31 December 2018.
This Directors’ Report has been prepared in accordance with the requirements of the Corporations Act 2001.
A reference to Viva Energy, we, us or our is a reference to the Group or the Company, as the case may be.
Principal activities
During the year, the principal activities of the Group included the following:
• sales of fuel and specialty products through Retail and Commercial channels across Australia;
• management of a national supply, distribution and terminal network; and
• manufacturing activities at the Group’s Geelong oil refinery.
Operating and financial review
An operating and financial review of the Group during the financial year and the results of these operations begins at page 7
of this Annual Report.
Governance
Directors
The Directors of the Company as at the date of this report are:
Robert Hill
Scott Wyatt
Dat Duong
Appointed 18 June 2018
Appointed 7 June 2018
Appointed 7 June 2018
Arnoud De Meyer
Appointed 18 June 2018
Hui Meng Kho
Jane McAloon
Sarah Ryan
Appointed 18 June 2018
Appointed 18 June 2018
Appointed 18 June 2018
Lachlan Pfeiffer was a Director of the Company from 7 June 2018 to 18 June 2018.
Directors’ qualifications, experience and special responsibilities
Information on the Directors of the Company, including their qualifications, experience, special responsibilities and directorships
of other listed companies is set out on pages 32 to 33 of this Annual Report.
Company Secretary
Lachlan Pfeiffer is the Company Secretary of the Company, having commenced the position on 7 June 2018.
Prior to joining Viva Energy in October 2014, Lachlan worked as a corporate lawyer for Skadden, Arps, Slate, Meagher and Flom
(UK) LLP, based in London for seven years. Lachlan started his career in Melbourne working for Norton Rose Fulbright (Australia).
Lachlan is a legal practitioner and holds a Bachelor of Commerce and a Bachelor of Laws. He is also a member of the Australian
Institute of Company Directors.
Lachlan is also a Non-Independent Non-Executive Director of Viva Energy REIT.
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Directors’ meetings
Details regarding Board and Board Committee meetings held in the period from 7 June 2018 (the date of incorporation of the
Company) to 3 December 2018 and each Director’s attendance at these meetings are set out below.
Director
Robert Hill
Scott Wyatt
Dat Duong
Arnoud De Meyer
Hui Meng Kho
Jane McAloon
Sarah Ryan
Lachlan Pfeiffer
Board
ARC
HSSEC
RNC
IC
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
6
6
6
6
6
6
6
1
6
6
6
6
6
6
6
1
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
Held: number of meetings held during the period in which the Director was eligible to attend.
Attended: number of meetings attended by the Director.
Directors have a standing invitation to attend meetings of Board Committees of which they are not members. All Directors
receive copies of the agendas, minutes and papers of each Board Committee meeting, save to the extent they are subject
to a relevant conflict.
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Remuneration report
Letter from the Remuneration and Nomination Committee Chair – Robert Hill
Dear Shareholder,
2018 marked a significant milestone for Viva Energy with the Company listing on the ASX on 13 July 2018. On behalf of the Board,
I present to you the Company’s inaugural Remuneration Report.
The purpose of the executive remuneration framework is to facilitate the long-term sustainable growth of your Company. This
includes ensuring levels of remuneration are sufficient for the attraction and retention of suitably qualified individuals focused
on Board priorities. The performance conditions and measurement timeframes are consistent with the objective of long-term
sustainable growth, and our performance targets are designed to be challenging but achievable. The payment vehicles and
ownership requirements are designed for shareholder alignment, and the deferral and vesting periods for appropriate risk
management aligned with the longer-term nature of the Company’s capital investment.
This report describes the Group’s Director and executive remuneration frameworks, and describes how they contribute to the
execution of our business strategy. This report also describes legacy remuneration arrangements in place under the previous
ownership, and explains the Board’s approach to ensuring continuity of management as the legacy arrangements expire.
Our 2018 performance was impacted by volatile and significantly weaker refining margins together with a number of external
events adversely affecting Geelong Refinery production. Softer fuel sales volumes from the Alliance network were largely
offset by growth in other retail channels and in our Commercial business, whilst overall the Commercial and Supply, Corporate
and Overhead segments were both ahead of the Prospectus forecasts. For the full year we reported Underlying EBITDA (RC)
of $528.9 million compared with the Prospectus forecast of $605.1 million for the same period.
The Prospectus described the gateway before the Executive Leadership Team (ELT) could receive any payment under the 2018
STI Plan was achievement of Underlying EBITDA (RC) of $605.1 million. Given that Underlying EBITDA (RC) was below this level,
the ELT will not receive any payment under the Company’s 2018 STI Plan.
Notwithstanding this outcome, the ELT has delivered well on a number of strategic initiatives, which are aimed at delivering future
growth. The Company completed the acquisition of a 50% interest in the Westside Petroleum business, and together with that
acquisition, the retail network was expanded by over 90 sites with the construction and development of new sites, and securing
new contracts with independent operators. A significant number of commercial sales contracts were also renegotiated and
extended, and a number of new contracts secured from competitors.
The major maintenance turnaround of the secondary distillation unit at Geelong was safely completed and, together with
other projects, this provides additional crude processing capability, which supports the refinery reaching its nominal crude
intake potential. The commissioning of new Jet storage in Cairns, new bitumen import capability in Townsville, and conversion of
the Clyde refinery in Sydney to a large-scale fuel import terminal were all delivered and will greatly improve our supply capability
in these regions. Finally, the Company has also successfully completed the transition from the legacy ERP platform to a modern
platform (Oracle JDE).
The Prospectus also described the current executive remuneration structure reflecting a mix of awards under a Legacy Long
Term Incentive Plan (Legacy LTI) in place prior to the Company’s Listing, and the remuneration framework introduced for the
Company’s listing on the ASX.
The Legacy LTI arrangements put in place by the private company before Listing have significant value for the executives and,
as such, will be effective in ensuring a continuity of management post-IPO. As the continuing tranches of the Legacy LTI vest
or expire, the Board will review executive remuneration arrangements to ensure an appropriate mix of remuneration elements
to maintain management continuity and focus executives on the long-term sustainable growth of your Company.
We welcome your feedback.
Robert Hill
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Remuneration report continued
1. Overview
Introduction
This Remuneration Report has been prepared in accordance with the Corporations Act 2001 and Corporations Regulations 2001.
The content in this report has been audited by PricewaterhouseCoopers, the Company’s external auditor.
The Company is required to prepare a remuneration report in respect of its Key Management Personnel (KMP), being those
people that have responsibility and authority for planning, directing and controlling the activities of Viva Energy, either directly
or indirectly. In 2018, the KMP were the Non-Executive Directors of the Company, the Chief Executive Officer (CEO) and the
Chief Financial Officer (CFO).
In January 2019, after the end of the reporting period the subject of this Remuneration Report, Daniel Ridgway was appointed
to a newly created role of Chief Operating Officer (COO). Given the Group-wide accountabilities and responsibilities of this role,
Daniel Ridgway will be a KMP in 2019 and his remuneration arrangements will be disclosed in the 2019 Remuneration Report.
The Company was incorporated on 7 June 2018 and it listed on the ASX on 13 July 2018. In connection with its Listing, the Company
completed a corporate restructure that included the acquisition of VEH and its controlled entities. This report describes the
Company’s post Listing remuneration arrangements. However, to provide shareholders with a complete overview of each KMP’s
2018 remuneration arrangements, remuneration received by KMP pre-Listing and the Legacy LTI arrangements that impacted
KMP during 2018 are also disclosed.
Details of KMP
The following individuals were KMP of the Company in 20181.
Non-Executive Directors
Name
Robert Hill
Title
Commencement as KMP2
Chairman and Independent Non-Executive Director
Arnoud De Meyer
Independent Non-Executive Director
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
18 June 2018
18 June 2018
7 June 2018
18 June 2018
18 June 2018
18 June 2018
Title
Chief Executive Officer
Chief Financial Officer
Commencement as KMP2
7 June 2018
7 June 2018
1. Lachlan Pfeiffer served as a Director of the Company from 7 June 2018 to 18 June 2018. This was a specific short-term arrangement on incorporation of the
Company and Mr Pfeiffer did not receive any remuneration in respect of his services as a Director of the Company. Mr Pfeiffer is not considered to be a KMP.
2. The commencement date for Directors (other than the CEO) is the date of their appointment to the Board. The CEO and CFO commenced as KMP
of the Company on its incorporation on 7 June 2018. The CEO and CFO also held those positions with the Viva Energy Group prior to Listing.
2. Remuneration governance
2.1 Role of the Board
The Board, with the guidance of the Remuneration and Nomination Committee, is responsible for:
• approving the remuneration of the Non-Executive Directors and executive KMP;
• ensuring the Company’s remuneration framework is aligned with the Company’s purpose, values, strategic objectives
and risk appetite;
• evaluating the performance of the CEO and other members of the ELT; and
• approving incentive plans and engaging external remuneration consultants as appropriate.
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Dat Duong
Hui Meng Kho
Jane McAloon
Sarah Ryan
Executives
Name
Scott Wyatt
Jevan Bouzo
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2.2 Role of the Remuneration and Nomination Committee
The Board has established a Remuneration and Nomination Committee to assist the Board in fulfilling its responsibilities
for governance and oversight of remuneration related matters.
The Remuneration and Nomination Committee is comprised of three Non-Executive Directors, being Robert Hill (Chair),
Hui Meng Kho and Arnoud De Meyer, the majority of whom are Independent Directors.
The Remuneration and Nomination Committee’s responsibilities include nomination and governance-related matters as well
as making recommendations to the Board in relation to:
• remuneration policies that will be designed to support the execution of the Company’s strategy and plans, and set remuneration
and rewards at levels to attract and retain the best people;
• the remuneration of the Non-Executive Directors;
• the remuneration packages (including fixed annual remuneration, incentive plans and any other benefits or arrangements)
of the CEO and other members of the ELT; and
• the administration and operation of equity and incentive plans and assessing the effectiveness and implementation of such plans.
The Remuneration and Nomination Committee Charter can be found in the Corporate Governance section on the Company’s website.
2.3 Use of remuneration consultants
The Remuneration and Nomination Committee seeks external remuneration advice to ensure that it is fully informed when
making decisions, including on recent market trends and practices and other remuneration-related matters. Remuneration
consultants are engaged directly by the Remuneration and Nomination Committee.
KPMG assisted the Remuneration and Nomination Committee and the Board throughout 2018 with such matters.
KPMG provided a formal declaration confirming that its recommendations were made free from undue influence by the members
of KMP to whom the recommendations related. On the basis of this declaration and the protocols and processes governing the
engagement of KPMG and receipt of its recommendations, the Board is satisfied that each of the recommendations were free
from undue influence by such persons.
In 2018, KPMG was paid $44,075 (excluding GST) in relation to remuneration recommendations provided as part of its engagement
as a remuneration consultant.
KPMG was paid $676,186 (excluding GST) for other services provided across the business during 2018.
3. Executive remuneration overview
3.1 Executive remuneration objectives
The overall objectives for executive remuneration at Viva Energy are to:
1. Drive sustainable value creation for shareholders;
2. Drive appropriate behaviours and culture;
3. Attract and retain high-calibre talent; and
4. Ensure remuneration is well understood and transparent.
To achieve these objectives, the Board seeks to set executive remuneration at levels that are competitive in the market (for
ASX-listed companies comparable in terms of size and complexity and industry to the Company), and also provide incentives
that focus the leadership team on achieving long-term sustainable growth. The Board intends to review the executive remuneration
strategy and remuneration levels on an annual basis.
The Prospectus described how the Board will typically set fixed remuneration, STI and LTI at or around the median of ASX-listed
companies of a similar size and industry. In 2018, recognising the value, and retentive impact, of the Legacy LTI for executives,
the Board set 2018 fixed annual remuneration and STI and LTI opportunities at levels significantly lower than the median of the
ASX-listed Comparator Group. As the Legacy LTI is a transitional arrangement, the Board will continue to review the overall
remuneration mix as the final tranches of the Legacy LTI awards vest or expire to ensure management continuity, motivation
and engagement beyond the legacy arrangements.
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Remuneration report continued
3. Executive remuneration overview continued
3.1 Executive remuneration objectives continued
The executive remuneration framework is summarised below.
2018 Executive remuneration framework
Component
Delivery vehicle
Performance measures
Link to strategy
Fixed Annual
Remuneration (FAR)
Base salary and
superannuation
Short Term Incentive
(STI) – reward for
performance against
annual objectives
50% is
paid in
cash
50% is
delivered
in Share
Rights
In 2018, recognising the value and
retentive impact of the Legacy LTI
to executives, the Board set the
2018 FAR at levels significantly
below the median of the Company’s
ASX-listed comparable peers.
As the final tranches of the Legacy
LTI awards vest or expire, the
Board intends to set the FAR at
a market competitive level with
regard for the size, complexity and
accountabilities associated with
the role, and the level of skills and
experience required to perform the
role.
A threshold underlying EBITDA
(RC) target must be met in order
for any STI to be paid. A scorecard
of performance measures is then
used to assess vesting outcomes,
with measures focused on financial
(60%), strategic and operational
excellence (30%) and safety and
culture (10%) outcomes.
Market competitive FAR is
appropriate in order to enable
Viva Energy to motivate, engage
and retain the calibre of executives
that can execute Company
strategy and continue to deliver
value to shareholders.
Incentivises execution of annual
performance objectives. A
balanced scorecard of measures
ensure targets are achieved in a
sustainable manner. STI deferral
creates further alignment with
shareholders and acts as a retention
instrument. The gateway ensures
variable pay is aligned with the
Company’s capacity to pay.
Drives the delivery of Viva
Energy’s long-term objectives in
a sustainable manner, provides
alignment with the interests of
shareholders, and encourages
long-term value creation.
Performance Rights,
allocated at face value
50% – relative TSR
(ASX100 Comparator Group)
25% – free cash flow
25% – ROCE
Long Term Incentive
(LTI) – reward long-
term performance
and value creation
for shareholders
Legacy LTI (historic
plan) – reward for
long-term value
creation
Options, vesting
over five years, with
an exercise price set
in context of share
price at date of grant.
No further grants
will be made under
this plan.
The Legacy LTI previously acted to motivate executives to transform and
grow the value of the Company over the initial five years through to a
potential exit event (i.e.: listing on the ASX). Although the Company has
since listed, the program for the CEO and the CFO continues to provide
a strong impact on retention as any unvested tranches of options will be
forfeited on resignation. Shares acquired through exercise of options are
subject to escrow conditions following listing encouraging management
continuity and alignment post IPO.
Minimum shareholding policy – The Board has adopted a minimum shareholding policy which requires each member of
KMP (other than Non-Independent, Non-Executive Directors), to accumulate a minimum shareholding of equivalent to 100%
of their fixed annual remuneration within five years of the date on which they become a member of KMP, and to maintain
such minimum shareholding for so long as they remain a member of KMP.
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3.2 Executive remuneration mix
The weighting of each remuneration component of an executive’s total remuneration is aligned to the objectives of the executive
remuneration framework outlined in section 3.1, in particular driving sustainable value for the Company. The following diagram sets out
the weighting of each remuneration component for the CEO and CFO based on the maximum potential value. This is calculated using
the face value of the 2018 STI and LTI opportunity upon issue, and does not represent actual remuneration for 2018.
CEO
(Scott Wyatt)
FAR – 28%
STI – 18%
(cash)
STI – 18%
(share rights)
LTI – 36%
(performance rights)
72% at risk
CFO
(Jevan Bouzo)
FAR – 32%
STI – 17%
(cash)
STI – 17%
(share rights)
LTI – 34%
(performance rights)
68% at risk
3.3 Executive remuneration delivery timeline – 2018 awards
FAR
Base salary +
superannuation
STI
12-month
performance period
50%
cash
50% of Share Rights
granted are eligible
to vest after 12 months
50% of Share Rights
granted are eligible
to vest after 24 months
LTI
3-year performance period
Performance
conditions
tested
Year 0
Year 1
Year 2
Year 3
Year 4
4. Remuneration framework
The components of the executive remuneration framework are explained in detail below.
4.1 Fixed Annual Remuneration (FAR)
FAR is comprised of base salary and superannuation.
4.2 Short Term Incentive (STI)
Viva Energy has established an STI Plan to reward executive KMP and other members of the executive team for strong performance
levels and contributions to the Company over a 12-month performance period.
Viva Energy assesses STI performance against a balanced scorecard comprised of a robust set of performance conditions, which
drive the Company’s short-term financial, strategic and operational objectives and set the platform for long-term success.
Underlying EBITDA (RC) was established as a gateway in 2018 given the particular focus for stakeholders on financial outcomes
in the immediate period following Listing.
No payments will be made under the 2018 STI Plan because the Underlying EBITDA (RC) gateway was not achieved.
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4. Remuneration framework continued
4.2 Short Term Incentive (STI) continued
2018 Group performance
The table below outlines the Company’s financial performance for 2018.
Revenue
Underlying profit after tax (RC)
Issue price of IPO
Share price at 31 December
Proposed dividend per share (fully franked)
Statutory earnings per share basic/diluted1
Underlying earnings per share
$16,395.1 million
$293 million
$2.50
$1.80
4.8 cents
29.8/29.4 cents
15.1 cents
Further information about the 2018 STI Plan is set out below.
Opportunity
CEO
• Target: 67% of FAR
CFO
• Target: 54% of FAR
• Maximum: 134% of FAR
• Maximum: 107% of FAR
Performance period
• Performance was assessed over a 12-month period, being the Company’s financial year
(i.e. 1 January 2018 – 31 December 2018 the ‘Performance Period’).
Performance gateway
Prospectus forecast Underlying EBITDA (RC) for 2018 of $605.1 million was required to be met before
any STI payment would be made.
Performance
conditions
Performance
condition
Weighting Measures
Objective
Financial
60%
• Underlying EBITDA
• Net Profit After Tax
• Free cash flow (pre finance/
Deliver sustainable shareholder
returns and consistent operating
cash flows.
Strategic and
operational
excellence
tax/dividends)
Retail
• Sales volume
• Net new sites
• Underlying EBITDA (divisional)
Commercial
• EBITDA from new accounts
30%
• Sales volume
• Underlying EBITDA for the
Commercial business
Refining
• Intake
• Availability
• Underlying EBITDA for the
Geelong Refinery
• LTIF (Loss time injury frequency)
Safety and
culture
10%
• API Tier 1 and 2 incidents2
• Employee engagement
Expand network, grow the Alliance
network, develop retail agent
platform, and increase premium
penetration.
Retain and grow quality accounts
and sustained earnings through
focus on value-led proposition.
Increase intake towards nameplate,
sustained reliability, and improved
productivity.
Build a generative safety culture
with highly engaged employees
focused on delivering high-
quality results.
1. See Note 4 to the Viva Energy’s financial report.
2. LTIF and API Tier 1 and 2 measures are industry standard safety performance metrics that reflect personal safety and process safety performance (respectively).
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Delivery
• 50% in cash; and
• 50% in Share Rights, with 50% eligible to vest 12 months after the cash component is paid and the
other 50% eligible to vest 24 months after that date. A Share Right entitles the participant to receive
one ordinary share for nil consideration subject to the satisfaction of the performance conditions.
Voting and dividends
entitlements
Share Rights do not carry dividend or voting rights prior to vesting.
Restrictions on dealing Holders of Share Rights must not sell, transfer, encumber, hedge or otherwise deal with Share Rights
Cessation of
employment
unless the Board allows it or the dealing is required by law. Holders of Share Rights will be free to deal
with the ordinary shares allocated on exercise of Share Rights, subject to the requirements of the Viva
Energy’s Securities Trading Policy.
If a participant ceases employment due to special circumstances (including death, terminal illness or
disablement), any unvested Share Rights held by such participants will remain on foot and subject to the
original vesting conditions (other than any vesting condition relating to continued employment with Viva
Energy), unless the Board exercises a discretion to treat them otherwise.
In all other circumstances (including due to a participant’s resignation or termination), unless the Board
exercises its discretion to treat them otherwise and subject to applicable law, unvested Share Rights will
automatically lapse.
Change of control
The Board may determine in its absolute discretion that all or a specified number of a participant’s Share
Rights will vest on a change of control.
4.3 Long Term Incentive Plan (LTI)
Viva Energy has established a LTI Plan to assist in the attraction, motivation, retention and reward of eligible employees.
The LTI Plan is designed to reward long-term performance, provide alignment with the interests of shareholders, and encourage
long-term value creation.
Viva Energy uses a combination of performance conditions which focus on sustainable long-term performance. The performance
conditions used in the LTI reflect Viva Energy’s long-term financial, strategic and operational objectives.
The CEO and CFO were granted Performance Rights under the LTI Plan in 2018 shortly after the Company’s Listing, as described
in the Prospectus. A waiver of ASX Listing Rule 10.14 for the grant to Scott Wyatt, the CEO, was received and noted in the Prospectus.
Details of the 2018 LTI are set out below.
Instrument
Performance Rights. A Performance Right entitles the participant to acquire one ordinary share for nil
consideration at the end of the performance period, subject to the satisfaction of the performance
conditions. The Board retains discretion to make a cash payment to participants on vesting of
Performance Rights in lieu of an allocation of shares.
Opportunity
CEO
• Target: 67% of FAR
CFO
• Target: 54% of FAR
• Maximum: 134% of FAR
• Maximum: 107% of FAR
Grant value
Performance Rights were granted using face value methodology.
The number of Performance Rights awarded to each participant in 2018 was calculated by dividing the
dollar value of their maximum LTI opportunity by $2.50 (the issue price under the IPO), and amounted to:
• Scott Wyatt: 480,000 Performance Rights.
• Jevan Bouzo: 192,000 Performance Rights.
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Remuneration report continued
4. Remuneration framework continued
4.3 Long Term Incentive Plan (LTI) continued
Performance
conditions
Performance
condition
Total
Shareholder
Return (TSR)
Weighting Measures
Objective
50%
Total shareholder return over the
period, relative to the ASX100
(Comparator Group).
To create strong alignment
between LTI outcomes and the
experience of shareholders.
Free Cash
Flow (RC) (FCF)
25%
Return on
Capital
Employed
(RC) (ROCE)
25%
FCF is calculated based on
Underlying EBITDA (RC),
normalised for market movements
in AUD refining margins and
adjusted for maintenance capital
expenditure, unrealised FX and
derivative movements, dividends
received from associated entities,
interest and taxes paid.
Underlying EBIT (RC) divided by
average capital employed (total
shareholder's equity plus net debt)
for each year.
This measure directly encourages
strong cost and capital management
with positive conversion of
underlying earnings to cash flow to
maximise cash that the Company
has available to fund growth
opportunities, pay dividends and
repay debts.
This measure incentivises
executives to undertake prudent
management of capital to maintain
positive returns on capital employed
over the performance period.
Replacement cost (RC) methodology is used in calculating both the FCF and ROCE outcomes, in order
to provide a truer reflection of underlying performance. As explained in the Operating and financial
review section of the Director’s Report, this approach removes the impact of net inventory gain/(loss)
caused by fluctuations in crude oil prices and foreign currency exchange rates.
The Board believes that the use of RC methodology in setting FCF and ROCE targets within the LTI
is appropriate, and provides a suitable balance with the relative TSR measure.
There will be no re-testing of any of the performance conditions, and Performance Rights that do
not vest will lapse (and expire).
Performance period
and exercise
The LTI will be assessed over a 36-month period. For the Performance Rights granted in 2018, performance
against the TSR component will be assessed from the date of Listing to 31 December 2020, while the
FCF component and ROCE component will be assessed based on performance from 1 January 2018
to 31 December 2020. Vested Performance Rights will be automatically exercised.
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Vesting schedules
Performance Rights which have not lapsed will vest at the end of the three-year period over which
performance is measured (1 January 2018 to 31 December 2020). As such, there is one vesting date
of 31 December 2020.
TSR component
The percentage of Performance Rights comprising the TSR component that vest, if any, will be based
on the Company’s TSR ranking relative to the Comparator Group over the performance period, as set
out in the following vesting schedule:
Viva Energy’s TSR ranking relative
to the Comparator Group
Less than 50th percentile
At 50th percentile
% of Performance Rights that vest
Nil
50%
Between 50th and 75th percentile
Straight-line pro rata vesting between 50% and 100%
At 75th percentile or above
100%
FCF component
The percentage of Performance Rights comprising the FCF component that vest, if any, will be
determined over the performance period by reference to the following vesting schedule:
Viva Energy’s cumulative FCF
over the performance period
Less than target FCF performance
Equal to target FCF performance
% of Performance Rights that vest
Nil
50%
Between target and stretch FCF performance
Straight-line pro rata vesting between 50% and 100%
At or above stretch FCF performance
100%
ROCE component
The percentage of Performance Rights comprising the ROCE component that vest, if any,
will be determined over the performance period by reference to the following vesting schedule:
Viva Energy’s average ROCE over
each year of the performance period
Less than target ROCE
Equal to target ROCE
Percentage of rights that vest
Nil
50%
Between target and stretch ROCE
Straight-line pro rata vesting between 50% and 100%
At or above stretch ROCE
100%
Disclosure of FCF
and ROCE targets
The Board considers disclosure of the FCF and ROCE targets can potentially indicate the Group’s margins
and, as such, jeopardise Viva Energy’s competitive position. The Group’s margins are commercially
sensitive, and the publication of such targets before the end of the performance period will prejudice
the competitive positioning of the Company.
The Board will provide full details of vesting outcomes in connection with each component of
the LTI, including the levels at which performance targets were set, following completion of the
performance period.
Other features
Performance Rights have the same voting and dividend entitlements, restrictions on dealing, treatment
on cessation of employment, and change of control provisions as the Share Rights described in section
4.2 above.
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Remuneration report continued
4. Remuneration framework continued
4.4 Claw back and preventing inappropriate benefits
The Board has claw back powers that it may exercise if, among other things:
• a participant has acted fraudulently or dishonestly, is in material breach of their obligations to the Viva Energy Group, has engaged
in negligence or gross misconduct, brought a member of the Viva Energy Group into disrepute or been convicted of an offence,
or has a judgment entered against them in connection with the affairs of the Viva Energy Group;
• Viva Energy is required by or entitled under law or under the Executive Services Agreement to reclaim remuneration from
the participant;
• a participant has made a material misstatement on behalf of a member of the Viva Energy Group or there is a material
misstatement or omission in the financial statements of the Viva Energy Group; or
• a participant’s entitlements vest or may vest as a result of the fraud, dishonesty, negligence or breach of obligations of any other
person and the Board is of the opinion that the entitlement would not have otherwise vested.
The claw back regime applies to cash STI and unvested or unexercised Share Rights granted under the STI Plan and unvested
or unexercised Performance Rights granted under the LTI Plan.
4.5 Legacy LTI
Section 10.4.3 of the Prospectus described the Legacy LTI introduced by VEH in 2015. Under that plan options over preference
shares in VEH (VEH Options)3 were issued to certain participants, including the CEO and CFO. All offers under the Legacy LTI
were made in the years prior to Listing and no further offers will be made under this plan.
The Legacy LTI was introduced in order to assist in the motivation and retention of key executives, and to provide alignment with
the interests of the previous shareholders. This was a key component of VEH’s remuneration framework.
As described in the Prospectus, the following took place on or around completion of the IPO, in accordance with the terms of the
Legacy LTI:
• The Company acquired all of the VEH Options held by each participant and, as consideration, issued options over ordinary shares
in the Company (Legacy LTI Options) to the participant. The Legacy LTI Options had substantially the same terms as the VEH
Options including with respect to the exercise price4 and vesting schedule. The Legacy LTI Options were then treated as follows:
(i) a portion of the Legacy LTI Options remained unvested – these will vest according to the vesting schedule subject to the
relevant participant’s continued employment with Viva Energy (see the table below for further details);
(ii) a portion of the Legacy LTI Options that had vested were cancelled in exchange for receipt of a cancellation fee (Option
Cancellation Fee). The Option Cancellation Fee was based on the difference between $2.50 (being the final issue price under
the IPO) and the exercise price for the vested Legacy LTI Option – for Scott Wyatt, the fee paid was $5,803,643, and for Jevan
Bouzo, it was $298,384; and
(iii) all remaining vested Legacy LTI Options were immediately exercised by the participant. The shares acquired on exercise
were subject to disposal restrictions to maximise alignment with the new shareholders following IPO. 50% of those shares are
restricted from sale until 30 June 2019, and the other 50% are restricted from sale until 30 June 2020. The exercise price paid
by Scott Wyatt was $4,272,201 and by Jevan Bouzo was $185,600.
• The Prospectus also explained that the terms of the Legacy LTI arrangements provided for a cash payment to each option holder
based on the shareholder distributions and returns for the period over which the VEH Options had been held (Legacy LTI Cash
Payment). The Legacy LTI Cash Payment for Scott Wyatt was $4,447,832, and for Jevan Bouzo was $264,6105.
The Option Cancellation Fee and the Legacy LTI Cash Payment were funded by the former shareholder, Vitol Investment
Partnership Limited (VIPL) 6 under the IPO, net of the proceeds from the exercise of the vested Legacy LTI Options (as set out
in paragraph (iii) above).
3. Holders of VEH Options were entitled to one preference share in the capital of VEH, for each VEH Option.
4. The exercise price was adjusted to reflect the dilution of the Group’s issued capital immediately following Listing.
5. The Legacy LTI Cash Payment was disclosed in the Prospectus in US dollars. For Scott Wyatt, this was US$3,367,009 (then converted into Australian dollars at
an exchange rate of 0.757 : 1 (US:AUD)). Mr Bouzo’s payment was disclosed as part of the total amount provided to all ELT team members.
6. Acting through its wholly-owned subsidiary, Viva Energy BV.
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The Board recognises that the value delivered under the Legacy LTI is significant, and draw shareholders’ attention to the following
matters that are relevant:
• the arrangement was introduced in 2015, while VEH was privately owned, to motivate executives to grow the value of the
Company. The Legacy LTI was designed to focus management on what was required to improve business performance.
As business performance significantly exceeded plans, the Legacy LTI enabled the leadership team to share in its growth;
• the Board imposed a mandatory escrow period to shares received on exercise of the Legacy LTI to ensure management’s
continued alignment with shareholder interests;
• executives will forfeit unvested Legacy LTI Options if they leave the Company before vesting. This condition was included
to minimise the risk of leadership turnover in the important period following IPO;
• the net proceeds of the Legacy LTI Cash Payment and Option Cancellation Fee were applied to fund the exercise price of the
immediately exercised Legacy LTI Options (with the shares issued on exercise remaining subject to escrow); and
• as described above, the net cash paid to the executives at IPO under the Legacy LTI was funded by the former shareholder, VIPL.
The new shareholders have not borne the cost of the 2018 cash payments.
The number of unvested Legacy LTI Options held by the CEO and the CFO, as well as the vesting schedule and a summary
of the key terms, are set out below.
Unvested Legacy LTI Options
Scott Wyatt
Number held as at 31 December 2018
5,767,854
Jevan Bouzo
1,538,095
Exercise price
A$0.82 per Legacy LTI Option
A$1.21 per Legacy LTI Option
Vesting schedule and expiry
2,883,926 Legacy LTI Options vested
on 1 January 2019.
384,523 Legacy LTI Options vested on
1 January 2019.
2,883,928 Legacy LTI Options are scheduled
to vest on 1 January 2020, subject to
continued employment with Viva Energy
and the terms of the Legacy LTI Options.
Each of the Legacy LTI Options will expire
on 5.00pm on 1 January 2020 unless
exercised earlier.
384,524 Legacy LTI Options are scheduled
to vest on each of 1 January 2020, 2021 and
2022, subject to continued employment with
Viva Energy and the terms of the Legacy LTI
Option.
Each of the Legacy LTI Options will expire
on 5.00pm on 1 January 2022 unless
exercised earlier.
Voting and dividend entitlements
Legacy LTI Options do not carry dividend or voting rights entitlements.
Restrictions on dealing
Legacy LTI Option holders must not sell, transfer, encumber, hedge or otherwise deal
with their Legacy LTI Options unless the Board allows it or the dealing is required by
law. Legacy LTI Option holders will be free to deal with the ordinary shares allocated
on exercise of their Legacy LTI Options, subject to the requirements of Viva Energy’s
Securities Trading Policy.
Cessation of employment, change of
control and claw back
Legacy LTI Options have the same treatment on cessation of employment, and change of
control provisions as the Share Rights described in section 4.2 above, and the same claw
back provisions as described in section 4.4.
4.6 Other legacy arrangements
Jevan Bouzo received a discretionary bonus of $400,0007 in recognition of his contribution to VEH in the period prior to the IPO.
This payment was funded by the previous shareholder VIPL, and there is no intention to make other discretionary bonuses as a
listed company, outside the annual STI and LTI Plans.
Jevan Bouzo also participated in a Legacy Long Term Incentive arrangement in his capacity as Head of Finance and Treasury
(the role he occupied prior to taking on the role as CFO). This was a retention arrangement awarded in 2016 and assessed
performance on both a company and individual level over the three-year period from 1 January 2016 to 31 December 2018. The
face value of the award was $50,000, and the maximum potential award under this plan was $150,000. Each year both a business
performance factor (determined at the discretion of the Board) and an individual performance factor were awarded. Receipt of
a final award was subject to both continued employment, and achievement of a threshold set at an above-target performance
level across the three years, to reward sustainable long-term performance. Following assessment of performance over the period,
Jevan Bouzo was awarded $81,000 gross (54% of the maximum potential award), which is scheduled to be paid in April 2019.
7. Paid in August 2018.
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5. Statutory remuneration disclosures
The table below has been prepared in accordance with the requirements on the Corporations Act 2001 and the relevant Australian
Accounting Standards. The amounts provided under the ‘2018 LTI’ and ‘Legacy LTI – share-based payment’ columns are based
on accounting values and do not reflect actual payments received in 2018.
Salary
and fees
2018
STI
Short-term benefits
Non-
monetary
benefits
1
Other
(legacy
discret-
ionary)
2
Post-
employ-
ment
benefits
Superan-
nuation
Annual
leave
3
Long
service
leave
Long-term benefits
Legacy
LTI cash
payment
5
2018
LTI
4
Legacy LTI
– share-
based
payment
6
Other
(long
term)
7
Total
Scott Wyatt
$622,396
Jevan Bouzo $345,966
Total
$968,362
$0
$0
$0
$5,383
$0
$16,836
$35,152
($15,715) $247,400 $4,447,832
$480,868
$0
$5,840,152
$2,941 $400,000
($9,441)
$38,619
$0
$98,960
$264,610
$41,515
$27,000
$1,210,170
$8,324 $400,000
$7,395
$73,771 ($15,715) $346,360 $4,712,443 $522,383
$27,000 $7,050,322
1 Non-monetary benefits represent the Viva Energy fuel discount benefits received, the payment of premiums for death and total and permanent disability
insurance cover, the payment of plan management fees for the Viva Energy Superannuation Plan, and payments made with respect to mobile phone use.
2 Other (Legacy discretionary) represents a discretionary bonus paid for contribution to the successful Listing. There is no intention to offer further discretionary
bonuses as a listed company. The bonus relates to 2018 services provided pre-Listing and was funded by the previous shareholder VIPL.
3 Jevan Bouzo’s annual leave is negative due to the leave taken being greater than the leave accrued in 2018.
4 2018 LTI represents the fair value of Performance Rights granted under the 2018 LTI, calculated in accordance with accounting standards.
5 Legacy LTI Cash Payment represents the cash payment made to option holders upon completion of the IPO, calculated by reference to shareholder
distributions over the vesting period. As described in section 4.5, the Legacy LTI cash payment was funded by the previous shareholder VIPL.
6 Legacy LTI – share-based payment, represents the statutory expense recorded in the income statement for (i) the value of Legacy LTI Options vesting across
the period, calculated in accordance with accounting standards; and (ii) with respect to Legacy LTI Options that were cancelled or exercised at or around the
IPO date, the associated employee expenses recognised on an accelerated basis.
7 Other (long term) represents an accrual under a long-term incentive arrangement recognising performance for the period 2016 – 2018. This relates to Jevan
Bouzo’s previous role of Head of Finance and Treasury. As further described in section 4.6, Jevan Bouzo is scheduled to receive a total payment of $81,000
in April 2019 in relation to this incentive.
6. Non-Executive Director remuneration
6.1 Non-Executive Director fees
Non-Executive Directors are paid annual fees. With the exception of the Chairman, each Non-Executive Director who is a chair or
a member of a Board Committee receives Committee fees in recognition of the additional responsibilities, time and commitment
required. Non-Executive Directors do not receive any performance-related remuneration.
Under the ASX Listing Rules and Viva Energy’s Constitution, the total amount paid to all Non-Executive Directors must not
exceed in aggregate in any year the amount fixed by Viva Energy in a general meeting for that purpose. As disclosed in the
Prospectus, this amount has been fixed by the Company at $1.9 million per annum. Non-Executive Director fees paid in 2018
were within this cap.
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6.2 Fee structure
The table below sets out Non-Executive Director remuneration, inclusive of statutory superannuation.
Board
Committee fees
Description
Chair
Director
Chair
Member
The fees paid to the Non-Executive Directors in 2018 are set out in the table below:
Short-term benefits
Since appointment
to the Company
Board
Prior to
appointment to the
Company Board
1
$
2
$202,383
$371,687
$0
$0
$114,460
$118,863
$114,460
$550,166
$0
$0
$149,500
$177,000
$149,500
$847,687
Robert Hill
Hui Meng Kho*
Dat Duong*
Jane McAloon
Arnoud De Meyer
Sarah Ryan
Total
Fees
$400,0008
$165,0009
$35,000
$17,500
Post-employment
benefits
Superannuation
benefits
$
$10,266
$0
$0
$10,874
$0
$10,874
$32,014
Total
$
$584,336
$0
$0
$274,834
$295,863
$274,834
$1,429,867
* Hui Meng Kho and Dat Duong have agreed to not receive any remuneration for their position as a Non-Executive Directors.
1. Represents gross Board fees (Chairperson and Directors) and Committee Chair and member fees effective from joining the Board of the Company.
2. These amounts were paid by VEH and were paid in connection with the IPO for consulting services and participation in the due diligence process.
The amount for Robert Hill also includes $35,000 in Non-Executive Director fees in connection with his role on the VEH Board prior to Listing. No consulting
fees will be paid going forward.
3. No non-monetary benefits were provided to Non-Executive Directors during 2018.
6.3 Minimum shareholding policy
As stated in the Prospectus, the Board has adopted a minimum shareholding policy that requires each KMP (excluding
Non-Independent Non-Executive Directors) to accumulate a minimum shareholding equivalent to 100% of their fixed
annual remuneration within five years of the date on which they become a member of KMP, and to maintain such minimum
shareholding for so long as they remain a member of KMP.
8. The Board Chair does not receive any additional fees for being the Chair or Member of any Board Committees.
9. Hui-Meng Kho and Dat Duong have elected to forgo Directors and Board Committee fees.
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Remuneration report continued
7. Equity movements
Performance Rights and Legacy LTI option holdings
Scott Wyatt
Jevan Bouzo
Plan
VEH Options
Legacy LTI Options
2018 LTI
Performance Rights
VEH Options
Legacy LTI Options
2018 LTI
Performance Rights
Exercise price
US$1.48
$0.82
$0.00
US$2.17
$1.21
$0.00
Balance as at
1 January 2018
Exchange VEH Options for
Legacy LTI Options (2)
Granted as
remuneration (4)
Exercised
Balance as at
31 December 2018
Vested
3,641,955
Unvested
2,427,971
Vested
(3,641,955)
Unvested
(2,427,971)
Nil
Nil
Nil
Nil
161,864
647,459
Nil
Nil
Nil
Nil
8,651,777
5,767,854
Nil
(161,864)
384,522
Nil
(647,459)
1,538,095
Nil
Nil
192,000
$351,360
Cancelled
Value
No.
Nil
Nil
Nil
Nil
–
–
–
–
480,000
$878,400
(3)
Nil
Nil
Nil
Nil
No.
Nil
Nil
Nil
Nil
Value
(5)
–
–
–
–
Vested
Nil
Nil
Nil
Nil
Nil
Nil
Unvested
(6)
Nil
5,767,854
480,000
Nil
1,538,095
192,000
3,460,711
5,191,066
$8,720,911
230,712
153,810
$198,415
1. No other members of KMP held Performance Rights or Options during the year.
2. As outlined in section 4.5, at the time of the Listing, VEH Options were acquired by the Company and, as consideration, Legacy LTI Options were granted to the
executives on 20 June 2018. Such Legacy LTI Options carry substantially the same terms as the VEH Options they replaced (including with respect to the exercise
price and vesting schedule). The number of options, and the exercise price, were adjusted to reflect the dilutionary impact of the Listing.
3. Each of the Legacy LTI Options were granted in 2018, having been exchanged for VEH Options granted in 2015 for Scott Wyatt and 2017 for Jevan Bouzo.
4. Each of the Performance Rights were awarded on 20 June 2018. The values represent a fair value calculation, prepared in accordance with accounting standards.
5. The value of each exercised Legacy LTI Option was calculated by subtracting the exercise price for the option ($0.82 for Scott Wyatt, and $1.21 for
Jevan Bouzo), from the issue price under the IPO of $2.50, and multiplying by the number of shares. All exercised shares remain in escrow as described
in section 4.5 above.
6. As at 31 December 2018, 100% of the outstanding Legacy LTI Options remained unvested. Prior to their exchange for Legacy LTI Options as described in Note 2
above, 60% of the total number of Scott Wyatt’s VEH Options had vested (20% of the total having vested during the 2018 year on 1 January 2018), and 20%
of the total number of Jevan Bouzo’s VEH Options, having vested on 1 January 2018.
8. Shareholdings
The number of shares in the capital of the Company held by each KMP are set out below1:
Robert Hill
Hui Meng Kho
Dat Duong
Jane McAloon
Arnoud De Meyer
Sarah Ryan
Scott Wyatt
Jevan Bouzo
Balance as at
1 January 2018
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Purchased
in 2018
40,000
Nil
Nil
20,000
20,000
24,291
Nil
Nil
Acquired
through
exercise of
options
Shares
disposed
Balance at
31 December
2018
Nil
Nil
Nil
Nil
Nil
Nil
5,191,0662
153,8103
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
40,000
Nil
Nil
20,000
20,000
24,291
5,191,066
153,810
1. No members of KMP held shares in VEH. The table captures Viva Energy shareholdings throughout the period.
2. Of the 5,191,066 shares acquired by Scott Wyatt on 18 July 2018, 2,595,533 are subject to a disposal restriction until 30 June 2019, and 2,595,533 are subject
to a disposal restriction until 30 June 2020.
3. Of the 153,810 shares acquired by Jevan Bouzo on 18 July 2018, 76,905 are subject to a disposal restriction until 30 June 2019, and 76,905 are subject
to a disposal restriction until 30 June 2020.
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7. Equity movements
Performance Rights and Legacy LTI option holdings
Scott Wyatt
Jevan Bouzo
Plan
VEH Options
Legacy LTI Options
2018 LTI
Performance Rights
VEH Options
Legacy LTI Options
2018 LTI
Performance Rights
Balance as at
1 January 2018
Exchange VEH Options for
Legacy LTI Options (2)
Exercise price
Vested
3,641,955
Unvested
2,427,971
Vested
(3,641,955)
Unvested
(2,427,971)
US$1.48
$0.82
$0.00
US$2.17
$1.21
$0.00
161,864
647,459
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
8,651,777
5,767,854
Nil
(161,864)
384,522
Nil
(647,459)
1,538,095
1. No other members of KMP held Performance Rights or Options during the year.
Granted as
remuneration (4)
No.
Nil
Nil
Value
–
–
Cancelled
(3)
Nil
Exercised
No.
Nil
Value
(5)
–
3,460,711
5,191,066
$8,720,911
480,000
$878,400
Nil
Nil
–
–
Nil
Nil
Nil
Nil
–
–
230,712
153,810
$198,415
Nil
Nil
192,000
$351,360
Nil
Nil
–
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Balance as at
31 December 2018
Vested
Nil
Nil
Nil
Nil
Nil
Nil
Unvested
(6)
Nil
5,767,854
480,000
Nil
1,538,095
192,000
2. As outlined in section 4.5, at the time of the Listing, VEH Options were acquired by the Company and, as consideration, Legacy LTI Options were granted to the
executives on 20 June 2018. Such Legacy LTI Options carry substantially the same terms as the VEH Options they replaced (including with respect to the exercise
price and vesting schedule). The number of options, and the exercise price, were adjusted to reflect the dilutionary impact of the Listing.
9. Executive service agreements
The CEO and CFO have open-ended employment contracts. Key terms are as follows:
3. Each of the Legacy LTI Options were granted in 2018, having been exchanged for VEH Options granted in 2015 for Scott Wyatt and 2017 for Jevan Bouzo.
• Employment may be terminated by either the Company or the executive upon providing 12 months’ written notice.
4. Each of the Performance Rights were awarded on 20 June 2018. The values represent a fair value calculation, prepared in accordance with accounting standards.
5. The value of each exercised Legacy LTI Option was calculated by subtracting the exercise price for the option ($0.82 for Scott Wyatt, and $1.21 for
Jevan Bouzo), from the issue price under the IPO of $2.50, and multiplying by the number of shares. All exercised shares remain in escrow as described
in section 4.5 above.
6. As at 31 December 2018, 100% of the outstanding Legacy LTI Options remained unvested. Prior to their exchange for Legacy LTI Options as described in Note 2
above, 60% of the total number of Scott Wyatt’s VEH Options had vested (20% of the total having vested during the 2018 year on 1 January 2018), and 20%
of the total number of Jevan Bouzo’s VEH Options, having vested on 1 January 2018.
8. Shareholdings
The number of shares in the capital of the Company held by each KMP are set out below1:
• Viva Energy may elect to pay the executive in lieu of all or part of such notice period with any such payment to be based on the
executive’s FAR over the relevant period. The executive may also be required to serve out the whole or part of the notice period
on an active or passive basis at the Board’s discretion.
• Any payments made to the executive upon termination of employment will be limited to the maximum amount permitted by
the Corporations Act.
• The executive’s employment may be terminated by Viva Energy without notice in certain circumstances such as un-remediated
material breach of their contract, serious misconduct (including dishonesty, fraud or wilful breach of duty), bankruptcy, failure
to comply with a reasonable direction from the Board, and if a personal profit is made at the expense of the Viva Energy Group
to which they are not entitled.
Robert Hill
Hui Meng Kho
Dat Duong
Jane McAloon
Arnoud De Meyer
Sarah Ryan
Scott Wyatt
Jevan Bouzo
Acquired
through
exercise of
options
Balance at
Shares
31 December
disposed
Balance as at
1 January 2018
Purchased
in 2018
40,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
20,000
20,000
24,291
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
5,191,0662
153,8103
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
2018
40,000
Nil
Nil
20,000
20,000
24,291
5,191,066
153,810
1. No members of KMP held shares in VEH. The table captures Viva Energy shareholdings throughout the period.
2. Of the 5,191,066 shares acquired by Scott Wyatt on 18 July 2018, 2,595,533 are subject to a disposal restriction until 30 June 2019, and 2,595,533 are subject
to a disposal restriction until 30 June 2020.
to a disposal restriction until 30 June 2020.
3. Of the 153,810 shares acquired by Jevan Bouzo on 18 July 2018, 76,905 are subject to a disposal restriction until 30 June 2019, and 76,905 are subject
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Directors’ report continued
Additional information
Significant changes in the state of affairs
The Company was admitted to the Official List of the ASX on 13 July 2018.
The following corporate restructure transactions were undertaken in connection with the IPO and listing on the Company ASX:
• The Company acquired:
– all of the shares in Viva Energy Holding Pty Limited from Viva Energy B.V. a subsidiary of Vitol Investment Partnership Limited; and
– all of the options in Viva Energy Holding Pty Limited from the participants in the Legacy Long Term Incentive Plan in return for
options over ordinary shares in the Company. Immediately following the Company’s listing, a portion of the new options were
cancelled for a cash payment, which was, in part, immediately applied to satisfy the exercise price in respect of all vested new
options. Unvested new options remained outstanding.
• The Company restructured a number of commercial arrangements to which Viva Energy Holding Pty Ltd and its controlled entities
were a party with Vitol Investment Partnership Limited, Vitol Holdings B.V. and/or certain of their respective affiliates.
As a result of the restructure, the Company held 100% of the equity in Viva Energy Holding Pty Limited from 17 July 2018.
The restructure has been treated as a common control transaction and is not in the scope of AASB 3 Business Combinations.
There were no other significant changes in the state of affairs of the Group during the year.
Dividends
An inaugural dividend was determined on 27 February 2019 in respect of the performance for the six-month period ended
31 December 2018 of 4.8 cents per share, amounting to $93.2M, payable on 15 April 2019 to shareholders registered on
28 March 2019. The dividend has not been provided for in the consolidated financial statements and will be recognised in
the consolidated financial statements for FY2019.
The inaugural dividend was determined based on a payout ratio of 60% of Distributable NPAT (RC)10 for the half year ended
31 December 2018. Distributable NPAT (RC) is calculated based on Underlying NPAT (RC) adjusted for the items in the table
below which are non-cash in nature or expected to normalise over the longer term. A reconciliation from Underlying NPAT (RC)
to Distributable NPAT (RC) for 1H2018, 2H2018 and FY2018 is set out in the table below.
Reconciliation of Underlying NPAT (RC) to Distributable NPAT (RC)
Underlying NPAT (RC)
Add: Lease straight-lining
Less: Revaluation gain/(loss) on FX and oil derivatives
Less: Fair value gain/(loss) in share of profit from associates
Less: Tax effect associated with above items
Distributable NPAT (RC)
Payout ratio
Total dividend
Dividend per share (cents)
1H2018
A$M
129.4
13.5
4.5
0.5
(5.6)
2H2018
A$M
163.6
11.8
(6.4)
(17.1)
3.5
FY2018
A$M
293.0
25.3
(1.9)
(16.6)
(2.1)
142.3
155.4
297.7
60%
93.2
4.8
No dividend was determined by the listed Group, Viva Energy Group Limited, during the period ended 31 December 2018.
Dividend franking account
The balance of the franking account of the Australian consolidated tax group, headed by Viva Energy Group Limited, is $46.4M
at 31 December 2018 based on a tax rate of 30%.
The dividend determined on 27 February 2019 will be fully franked and will reduce the franking credits available to the Group.
10 Distributable NPAT (RC) is the equivalent of the defined term Underlying NPAT (RC), as it was used in the Prospectus.
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Matters subsequent to the end of the financial year
Coles Alliance partnership
On 6 February 2019, the Group announced the extension of the Alliance agreement with Coles Express through to 2029 under
revised terms to create greater alignment between both parties and position the agreement for future growth. Under the revised
terms, in March 2019 the Group will assume full responsibility for the provision of the fuel offering, including retail fuel pricing
and marketing across the Alliance network. Coles Express will continue to operate Alliance stores and manage the customer
experience. As a result of the amendments to the Alliance terms and fuel margin forgone by Coles Express, the Group will make
a one-off payment of $137 million in March 2019 to be funded by existing debt facilities.
Bank refinancing
On 26 March 2018, the Group replaced its borrowing facility with a US$700 million syndicated, unsecured revolving credit facility
which has an initial two-year term and a one-year extension option.
At the end of the reporting period, the Group has entered into discussions with its existing lending group and is seeking to extend
its existing US$700 million syndicated, revolving credit facility. This is expected to be completed on terms and conditions largely
consistent with the existing facility.
Restructure of Liberty arrangements
On 27 February 2019, the Group agreed to acquire the remaining 50% interest in Liberty Oil Holding Pty Ltd’s wholesale business,
together with agreeing to establish a new retail joint venture to continue to grow the Liberty Oil retail business, of which it will own
50%. The consideration payable for the proposed transaction is $42 million, which will be funded out of existing debt facilities.
The transaction remains subject to regulatory approvals.
Likely developments and expected results of operations
Except as otherwise disclosed in this report, further information on likely developments and their expected results has not been
included in this report on the basis that it would be likely to result in unreasonable prejudice to the interests of the Group.
Directors’ interest in share capital
The relevant interests of each Director in the share capital of the Company as at the date of this Directors’ Report is set out below.
Director
Robert Hill
Scott Wyatt
Dat Duong
Arnoud De Meyer
Hui Meng Kho
Jane McAloon
Sarah Ryan
Number of ordinary shares in which the Director has a relevant interest
40,000
5,191,066
–
20,000
–
20,000
24,291
Rights and options
Non-Executive Directors do not hold any rights or options over shares in the Company or any Group entity.
The Managing Director and CEO, Scott Wyatt, holds the following securities (in addition to the ordinary shares set out in the
table above):
• 5,767,854 options over ordinary shares issued under the Company’s Legacy Long Term Investment Plan (LTIP); and
• 480,000 Performance Rights issued under the Company’s Legacy LTIP.
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Directors’ report continued
Shares under option
Following on from the IPO, the following changes has been made to the employee share option plan:
• The Group acquired all of the options in VEH from the participants in the Legacy LTIP in return for options over ordinary shares
in the Group (Legacy LTI Options).
• Immediately following the ASX listing, a portion of the Legacy LTI Options were cancelled for a cash payment which was, in part,
immediately applied to satisfy the exercise price in respect of all remaining vested options.
• After listing, executive management hold shares in the Group as well as a total of 16,534,520 Legacy LTI Options to replace
the legacy options that had not yet vested. The remaining vesting periods are consistent with the legacy share option plan.
• In addition to this, a new Short Term Incentive Plan (STIP) and LTIP were put in place for 2018 including both cash, and
Performance Rights for executive management.
The total granted options over unissued ordinary shares outstanding as at 31 December 2018 is 16,534,520 with a weighted
average exercise price per share option of A$0.94. These options are held by employees, including Lachlan Pfeiffer, Company
Secretary. During the period 1,600,000 Performance Rights were granted, 5,341,533 options were exercised and 3,884,749 options
were cancelled.
Non-audit services
During FY2018 the Company’s auditor, PricewaterhouseCoopers (PwC), has been employed on assignments additional to its audit
services. PwC received or are due to receive the following amounts for the provision of non-audit services. The nature and scope
of each type of non-audit services provided means that auditor independence was not compromised.
Fees payable to PwC for assurance services
Audit or review of financial reports of the Group
Audit of WAG accounts
Other assurance services
Total assurance services
Fees payable for other services
Tax advisory
Other services
Total assurance and other services
$
635,000
20,000
2,127,824
2,782,824
35,000
132,276
2,950,100
The Directors have formed the view, based on advice from the Risk and Audit Committee, that the provision of non-audit services
is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The non-audit
services provided did not involve the external auditor reviewing or auditing its own work or acting in a management or decision
making capacity for the Company, or otherwise could reasonably be expected to compromise its independence.
No officer of the Company was a partner or director of PricewaterhouseCoopers during the financial year.
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 58 and forms part of this Directors’ Report
Environmental performance
The Group is subject to Federal, State and Local Government environmental regulation in respect of its land holdings, manufacturing,
terminal and distribution facilities and marketing operations.
The Group’s terminals and refinery operate pursuant to licences issued by the relevant environmental regulators or other authorities.
These licences generally require discharges to air and water to be below specified levels of contaminants, and solid wastes to be
removed to an appropriate disposal facility (for some facilities only). These requirements arise under relevant legislation within
the jurisdictions where the facilities operate.
During the year, there was a 14% reduction in the number of breaches of environmental licence requirements. The breaches that did
occur were reported to the relevant regulators and the Group has taken steps to investigate, mitigate and reduce the reoccurrence
of these incidents. The improved performance is largely attributed to a reduced number of licence non-compliances at the
Group’s terminals.
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Instances of newly discovered legacy soil and groundwater contamination were reported to environmental authorities in accordance
with regulatory obligations and the Group has received formal regulatory notices, including direction for either further investigation
or remediation. The Group is working with the relevant environmental authorities in relation to each of these incidents.
In January 2018, the Group identified and rectified a fuel leak on the Mascot Jet Pipeline at Sydney Olympic Park, Homebush.
Investigation has concluded that the cause is most likely as a result of historical third party activity, and the New South Wales
Environment Protection Authority has confirmed it will not be initiating any prosecution proceedings.
The Group was ordered to pay a fine of $21,000 in total, without conviction, and pay costs of $10,870 after pleading guilty in court
to four related offences under the Environment Protection Act 1970 (Vic). These offences related to contravention of a licence
condition by exceeding the fluoride emission limit on four separate occasions between December 2015 and March 2016 at the
Geelong Refinery.
The Group was ordered to pay a fine of $7,929 for a breach of an environmental licence condition at the Geelong Refinery in
regard to an incident that occurred in 2017.
The Group entered into an Enforceable Undertaking with the New South Wales Environment Protection Authority following the
supply of petrol in November 2017 and early December 2017 from the Group’s Parramatta Terminal which did not comply with the
applicable vapour pressure limits under the Protection of the Environment Operations (Clean Air) Regulation 2010. The Enforceable
Undertaking requires the Group to pay $250,000 to the NSW Office of Environment and Heritage towards a long-term roadside air
quality monitoring station within the NSW Air Quality Monitoring Network and $20,500 for the EPA’s legal and investigation costs.
The Group pleaded guilty in the NSW Land and Environment Court to two offences under the Protection of Environment Operations
Act 1997 (NSW) relating to a fuel oil pipeline leak at Gore Bay Terminal in December 2016. The Court is yet to hand down the
penalty for these offences.
Indemnification and insurance of Directors, officers, employees and auditors
The Company has entered into a deed of access, insurance and indemnity with each Director and the Company Secretary of
the Group. Under those deeds, the Company indemnifies, to the extent permitted by law, each Director and the Company
Secretary against any loss that may arise from, or in connection with, any act or omission by that Director/Company Secretary in
the performance of, or relating to or in connection with, their position as an officer of the Company or the execution or discharge
of duties as such an officer, to the full extent permitted by law. Each deed provides that the Company must meet the full amount
of any such loss, including legal costs (calculated on a full indemnity basis) that are reasonably incurred, charges and expenses.
Under the deeds, the Company must arrange and maintain a directors’ and officers’ insurance policy for the Directors and the
Company Secretary to the extent permitted by law, and must use reasonable endeavours to maintain such insurance for the
period from the date of the deed until seven years after the Director/Company Secretary ceases to hold office. This seven-year
period can be extended where certain actions or proceedings commence before the period expires.
The Group has also entered into insurance policies to insure the Directors and Company Secretary. The Group has paid the
premiums for those policies. In accordance with common commercial practice, the insurance policy prohibits disclosure of the
nature of the liability insured against and the amount of the premium.
Rounding of amounts
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, all amounts in this
Directors’ Report have been rounded to the nearest one hundred thousand dollars ($100,000), or in certain cases, to the nearest
one thousand dollars ($1,000).
This Directors’ Report is made in accordance with a resolution of the Board.
Robert Hill
Chairman
Date: 27 February 2019
Scott Wyatt
CEO and Director
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Auditor’s independence declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Viva Energy Group Limited for the year ended 31 December 2018, I
declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Viva Energy Group Limited and the entities it controlled during the
period.
Chris Dodd
Partner
PricewaterhouseCoopers
Melbourne
27 February 2019
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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Consolidated statement of profit or loss
For the year ended 31 December 2018
Revenue from contracts with customers
Replacement cost of goods sold
Net inventory loss
Sales duties and taxes
Import freight expenses
Historical cost of goods sold
Gross profit
Net gain on other disposal of property, plant and equipment
Other income
Transportation expenses
Salaries and wages
General and administration expenses
Maintenance expenses
Operating leases
Sales and marketing expenses
Impairment
Interest income
Share of profit of associates
Realised/unrealised gain/(loss) on derivatives
Net foreign exchanges (loss)/gain
Movement in financial assets
Depreciation and amortisation expenses
Finance costs
Profit before income tax expense
Income tax benefit/(expense)
Profit after tax
Earnings per share
Basic earnings per share
Diluted earnings per share
Notes
1
5
2018
$M
2017
Restated*
$M
16,395.1
13,905.4
(10,328.8)
(7,769.7)
(93.6)
(8.7)
(4,135.3)
(4,123.6)
(286.0)
(256.4)
(14,843.7)
(12,158.4)
1,551.4
1,747.0
10.2
10.2
(278.6)
(249.7)
(128.0)
(100.4)
(286.3)
(114.2)
(1.4)
403.0
2.7
63.5
39.7
(29.6)
–
(129.7)
(41.9)
307.7
271.9
579.6
Cents
29.8
29.4
15.7
15.7
(311.1)
(242.7)
(191.6)
(102.4)
(269.0)
(106.1)
(0.5)
539.3
3.6
65.4
(41.1)
17.7
4.8
(107.2)
(31.3)
451.2
(161.5)
289.7
Cents
14.9
14.6
2
2
28
2
2
2
25
4
4
* See Note 1 Revenue from contracts with customers for details regarding the restatement of revenue and cost of goods sold as a result of the retrospective
application of AASB 15 Revenue from Contracts with Customers.
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
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Consolidated statement of comprehensive income
For the year ended 31 December 2018
Profit for the year
Other comprehensive income
Other comprehensive income that may be reclassified to profit or loss
in subsequent years (net of tax)
Effective portion of changes in fair value of cash flow hedges – Unrealised
(losses)/gains on cash flow hedges recognised by Viva Energy REIT
Other comprehensive income not to be reclassified to profit or loss
in subsequent years (net of tax)
Remeasurement of retirement benefit obligations
Net other comprehensive income/(loss)
Total comprehensive income for the year (net of tax)
Notes
2018
$M
579.6
2017
$M
289.7
28
31
(3.2)
1.6
(1.4)
(4.6)
(0.1)
1.5
575.0
291.2
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
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Consolidated statement of financial position
As at 31 December 2018
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets classified as held for sale
Derivative assets
Prepayments
Current tax assets
Total current assets
Non-current assets
Long-term receivables
Property, plant and equipment
Goodwill and other Intangible assets
Post-employment benefits
Investments accounted for using the equity method
Net deferred tax assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Provisions
Short-term borrowings
Derivative liabilities
Current tax liabilities
Total current liabilities
Non-current liabilities
Provisions
Long-term borrowings
Net deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
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Notes
2018
$M
2017
$M
6
8
5
12
18
9
13
12
14
31
28
25
10
15
11
18
15
19
25
21
21
108.6
1,138.7
1,011.3
4.1
15.5
71.0
78.4
164.7
1,165.0
965.2
9.7
–
62.2
–
2,427.6
2,366.8
17.5
11.7
1,467.2
1,398.6
432.5
11.4
664.9
136.6
1.6
384.7
15.3
628.6
–
0.8
2,731.7
5,159.3
2,439.7
4,806.5
1,922.8
1,586.0
123.2
7.2
0.9
–
152.1
246.4
9.3
139.0
2,054.1
2,132.8
174.1
152.0
–
326.1
2,380.2
169.3
43.5
226.1
438.9
2,571.7
2,779.1
2,234.8
4,861.3
(4,226.4)
2,144.2
2,779.1
645.2
11.5
1,578.1
2,234.8
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
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Consolidated statement of changes in equity
For the year ended 31 December 2018
Balance at 1 January 2017
Profit for the year
Unrealised gains/(losses) on cash flow hedges
recognised by Viva Energy REIT
Remeasurement of retirement benefit obligations
Total comprehensive income for the year
Dividends paid
Share-based payment reserve
Balance at 31 December 2017
Balance at 1 January 2018
Profit for the year
Unrealised gains/(losses) on cash flow hedges
recognised by Viva Energy REIT
Remeasurement of retirement benefit obligations
Total comprehensive income for the year
Dividends paid
Capital return
Disposal of share by prior owner
Capital contribution from IPO
Reserve arising from IPO
Share-based payment reserve
Balance at 31 December 2018
Notes
Contributed
equity
$M
645.2
31
32
31
32
Reserves
$M
8.8
–
1.6
(0.1)
1.5
–
1.2
Retained
earnings
$M
Total
equity
$M
1,541.2
2,195.2
289.7
289.7
–
–
1.6
(0.1)
289.7
291.2
(252.8)
–
(252.8)
1.2
–
–
–
–
–
–
645.2
11.5
1,578.1
2,234.8
645.2
11.5
1,578.1
2,234.8
–
579.6
579.6
–
–
–
–
–
(45.1)
(600.1)
4,861.3
(3.2)
(1.4)
(4.6)
–
–
–
–
–
–
(3.2)
(1.4)
579.6
575.0
(13.5)
–
–
–
–
–
(13.5)
(45.1)
(600.1)
4,861.3
(4,235.2)
1.9
–
–
(4,235.2)
1.9
4,861.3
(4,226.4)
2,144.2
2,779.1
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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Consolidated statement of cash flows
For the year ended 31 December 2018
Operating activities
Receipt from trade and other debtors
Payments to suppliers and employees
Interest received
Interest paid on loans
Interest paid on finance lease
Income tax paid
Net cash flows from operating activities
Investing activities
Purchases of property, plant and equipment
Net cash consideration paid for the acquisition of Shell Aviation
Proceeds from sale of property, plant and equipment
Loan repayments received from third parties
Dividends received from associates
Purchase of intangible asset
Loan to associate
Investment in associate
Net cash flows (used in)/from investing activities
Financing activities
Drawdown of borrowings
Repayments of borrowings
Dividend paid
Upfront financing cost paid and capitalised
Net cash flows used in financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
s
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Notes
2018
$M
2017
$M
19,006.8
16,034.1
(18,419.2)
(15,653.1)
2.7
(15.3)
(7.7)
(280.1)
287.2
(241.3)
(4.0)
17.5
–
37.5
(2.1)
(3.5)
(14.9)
(210.8)
3,720.0
(3,850.0)
–
(2.5)
(132.5)
(56.1)
164.7
108.6
7
27
32
32
6
2.4
(10.9)
(7.5)
(202.9)
162.1
(231.1)
(259.0)
26.7
19.7
32.8
–
–
–
(410.9)
2,315.0
(2,075.0)
(252.8)
–
(12.8)
(261.6)
426.3
164.7
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
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Notes to the consolidated financial statements
General information
Reporting entity
The consolidated financial statements of Viva Energy Group Limited (Company) and the entities it controlled (collectively, Group)
for the year ended 31 December 2018 were authorised for issue in accordance with a resolution of the Directors on 27 February 2019.
The Company is a for-profit Company limited by shares incorporated in Australia whose shares are publicly traded on the Australian
Securities Exchange (ASX: VEA).
The Group is principally engaged in refining, marketing, sale, supply and distribution of fuel and related specialty products.
The Group’s principal place of business is 720 Bourke Street, Docklands, Australia.
Pre-IPO restructure
On 13 July 2018, the Group was part of an Initial Public Offering (IPO) and listed a total of 1,944,535,168 shares on the ASX.
As part of the IPO process, the Group acquired 100% of the shares in Viva Energy Holding Pty Limited (VEH) from Viva Energy B.V
(a subsidiary of Vitol Investment Partnership Limited). The shares in VEH were transferred to the Group on 17 July 2018, immediately
prior to the allotment of shares pursuant to the IPO on 18 July 2018. Viva Energy B.V (now known as VIP Energy Australia B.V.) remains
a significant shareholder of the Group with 45% ownership interest.
The restructure has been treated as a common control transaction1 and is outside the scope of AASB 3 Business Combinations.
The Group elected to use predecessor accounting for the acquisition of VEH where:
• no assets or liabilities were restated to their fair values. Instead, the Group adopted VEH carrying values at the date of acquisition;
• the difference totalling $2.5 billion between the consideration given ($4.8 billion2) and the aggregate reorganisation date book value
of VEH assets and liabilities ($2.3 billion) was included in equity within a separate IPO reserve. No goodwill was recognised; and
• VEH’s results and balance sheet were incorporated into the consolidated financial statements of the Group as if both entities had
always been combined. Consequently, the consolidated financial statements reflect all entities’ full year results.
There were also changes to the Employee Option Plan as part of the IPO discussed in Note 32(e) Related party disclosures.
Basis of preparation
Statement of compliance
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting
Standards Board.
The financial report has been prepared on a historical cost basis, except for financial assets and liabilities (including derivative
instruments) which have been measured at fair value.
The financial report is presented in Australian dollars. In accordance with ASIC Legislative Instrument 2016/191, all values are
rounded to the nearest one hundred thousand ($100,000), or in certain cases, to the nearest one thousand ($1,000).
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (functional currency). The consolidated financial statements are presented in Australian
dollars, which is the Group’s functional and presentation currency.
1 A common control transaction is a transfer of net assets or an exchange of equity interests between entities under the control of the same parent.
The combining entities are ultimately controlled by the same party or parties both before and after the combination.
2 Represents net transaction proceeds, calculated as total share issuance value of $4.9 billion less transaction costs of $93.9 million.
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Use of estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will by definition seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
• Information about the assumptions and the risk factors relating to impairment are described in Note 8 Trade and other receivables
and Note 14 Goodwill and other intangible assets.
• Note 12 Property, plant and equipment describes the policy and estimation of minimum operating stock.
• Note 15 Provisions provides key sources of estimation, uncertainty and assumptions used in regards to estimation of provisions.
• Note 17 Financial assets and liabilities and Note 23 Fair value of financial assets and liabilities provides an explanation of the key
assumptions used to determine the fair value of financial assets and liabilities.
• Information about the assumptions and the risk factors relating to income tax expense and deferred tax balances are described in
Note 25 Income tax and deferred tax.
New and revised accounting standards
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board that are relevant to its operations and effective for the current annual reporting period. The Group has
reviewed and, where relevant, adopted the following standards in line with the AASB.
• AASB 9 Financial Instruments (effective 1 January 2018) discussed in Note 8 Trade and other receivables, Note 17 Financial assets
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and liabilities; and
• AASB 15 Revenue from Contracts with Customers (effective 1 January 2018) discussed in Note 1 Revenue from contracts
with customers.
The adoption of these Standards and Interpretations and the new related accounting policies are disclosed in the notes
referenced above.
Several other amendments and interpretations listed below apply for the first time in 2018, but do not have a significant impact on
the consolidated financial statements of the Group in the current or future periods.
• AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based
Payment Transactions;
• AASB 2017-1 Amendments to Australian Accounting Standards – Transfers to Investment Property, Annual Improvements
2014-2016 Cycle and Other Amendments; and
• Interpretation 22 Foreign Currency Transactions and Advance Consideration.
Standards issued but not yet effective as at 31 December 2018
Australian Accounting Standards and Interpretations issued, but not yet effective, as at 31 December 2018, which are likely
to have a material impact are listed below and detailed in the relevant notes.
• AASB 16 Leases (effective 1 January 2019) discussed in Note 16 Commitments and contingencies.
This standard (and interpretations) is applicable from periods beginning 1 January 2019 or beyond as noted by the effective date,
and the Group intends to adopt this standard when it becomes effective. All other standards issued but not yet effective are not
expected to have a material effect on the consolidated financial statements.
Reclassification and changes in financial presentation
Where presentation and classification of items in the consolidated financial statements changes, the comparative amounts
are also reclassified unless it is impractical to do so. The nature, amounts and reason for the reclassification are also disclosed.
If the reclassification affects an item on the balance sheet, a third consolidated statement of financial position is also presented.
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Notes to the consolidated financial statements continued
Results for the year
1. Revenue from contracts with customers
Set out below is the disaggregation of the Group’s revenue from contracts with customers:
Revenue from sale of goods
Non-fuels income
Other revenue
Total revenue
2018
$M
2017
$M
16,194.0
13,733.9
151.2
49.9
141.7
29.8
16,395.1
13,905.4
Revenue from sale of goods
The Group primarily generates revenue from the sale of refined products in Australia directly or indirectly to service stations for sale
to motor vehicle users and to commercial businesses such as road transport, and shipping companies and airlines. The refined
products that the Group sells are either refined at its own Geelong Refinery or imported into Australia as refined products.
Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally
on delivery. The customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation
that could affect the customer’s acceptance of the products. No element of financing is deemed present as the sales are made
with a credit term of typically 15 to 45 days, which is consistent with market practice. Revenue is recognised based on the price
specified in the contract, net of expected returns, trade allowances, rebates and GST collected on behalf of third parties. Total
revenue includes the recovery of excise paid.
Non-fuels income
Non-fuel income is principally from the site lease and licence payments that the Group receives under a long-term Alliance with
Coles Express. Other non-fuel income is from the use of Shell Card, the payment of royalties on convenience sales at Alliance
retail sites and commissions paid by the operators of retail agent sites.
(i) Shell Card fees
The Group offers Shell Cards that provide customers a secure and efficient way to buy quality fuels, access an extensive national
service stations network and the option to use online tools to manage fuel spending. The Group charges a monthly card fee to
its customers for the use of the card. Revenue from Shell Card is recognised over a period of time. No element of financing is
deemed present as the sales are made with a credit term of typically 15 to 45 days, which is consistent with market practice.
(ii) Royalties
The Group receives royalties on convenience store sales in excess of agreed sales thresholds. The amount payable to the Group
is calculated on an annual basis as a percentage of any excess over a threshold amount of gross sales of certain kinds of goods
and services made on certain sites. Revenue from royalties is recognised over a period of time.
(iii) Brand licence fees
Licence fees relate to the right to access and to market fuel under the Shell brand. The Group (i.e. licensor) holds the licence
to Shell brand and therefore retains the control over the brand. Revenue from licence fees is recognised over time over the
licence period.
(iv) Site lease and licence
The Group has granted to Coles Express a lease (or licence) of the premises for the conduct of its business from that site and the
right to use the fuel equipment on the premises for the conduct of its business. The head leases remain with the Group, as well as
the obligation to maintain fuel, signage and forecourt infrastructure. The right to use and occupy the sites or grant such rights to
another third party will revert to the Group upon expiry of the contractual term.
Calculation of the site lease and licence fee payable by Coles Express is detailed in each Site Agreement and on commercial
terms that are bespoke to the Alliance arrangements. Revenue from lease/licence fees is recognised over time over the lease/
licence period.
These site licences have been assessed to be leases for the purposes of meeting revenue standard requirements.
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Other revenue
Other income includes rental recoveries, income from sub-leases and management fees earned through the Aviation business.
Assets and liabilities related to contracts with customers
There were no assets or liabilities recognised in the balance sheet related to revenue from contracts with customers because
the period of amortisation is less than one year.
Disaggregation of revenue from contracts with customers
No one customer accounts for more than 10% of revenue other than income obtained from Eureka Operations Pty Ltd (Coles
Express), which operates 666 Viva Energy controlled service stations in alliance with the Group.
AASB 15 Revenue from Contracts with Customers – Impact of Adoption
AASB 15 Revenue from Contracts with Customers specifies the accounting treatment for revenue arising from contracts with
customers (except for contracts within the scope of other accounting standards such as leases or financial instruments). The core
principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services when control of
the goods or services passes to the customer. The revenue to be recognised should reflect the consideration to which the entity
expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The Group adopted AASB 15 using the full retrospective method of adoption with the date of initial application of 1 January 2018.
Under this method, the standard can be applied either to all contracts at the date of initial application or only to contracts that
are not completed at this date. The Group elected to apply the standard to all contracts as at 1 January 2018.
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The cumulative effect of initially applying AASB 15 should be recognised at the date of initial application as an adjustment to
the opening balance of retained earnings. There were no retrospective adjustments to retained earnings as the net impact of
the adjustment is nil.
The Group previously showed revenue and cost of goods sold on a gross basis for certain buy-sell contracts it holds with other
industry participants for the purchase and sale of refined products. New standard guidance implies that these contracts are
not within the scope of AASB 15 and revenue was adjusted to be shown on a net basis in respect of these contracts under the
new standard. An equivalent adjustment to remove the purchase side from cost of goods sold was also made, and thus there is
no impact on gross profit or on profit after tax. The adjustment for the full year to 31 December 2018 reduced revenue and cost
of goods sold by $1,966.8 million as compared to what would have been recorded under the previous revenue standard. The
2017 prior period comparative revenue and cost of goods sold have also been adjusted down by $1,755.2 million to comply with
retrospective application of the new standard.
2. Expenses
Operating leases
Leases from Viva Energy REIT
Other operating leases
Non-cash straight lining on leases
Total operating leases
Realised/unrealised gain/(loss) on derivatives
Derivative contracts
2018
$M
(134.0)
(127.0)
(25.3)
(286.3)
2018
$M
39.7
2017
$M
(125.6)
(114.5)
(28.9)
(269.0)
2017
$M
(41.1)
The Group is exposed to the effect of changes in foreign exchange and commodity price movements. During the year the
Group entered into derivative contracts, being principally foreign exchange currency contracts (forwards and swaps) and
commodity derivative instruments for the purpose of managing the market risks arising from the Group’s operations and to
hedge market exposure.
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Notes to the consolidated financial statements continued
2. Expenses continued
Derivatives are recognised at fair value. The gain or loss on subsequent remeasurement is recognised immediately in the consolidated
statement of profit or loss. For the year ended 31 December 2018 and including any open positions at balance date, gains of $39.7
million were made (2017: $41.1 million loss). The gains in the current period were the result of various commodity price movements
and a weakening AUD through the year.
Foreign exchange gain/(loss)
Foreign exchange gains
Foreign exchange losses
Net foreign exchange gain/(loss)
2018
$M
123.5
(153.1)
(29.6)
2017
$M
141.3
(123.6)
17.7
Foreign currency transactions are translated into Australian dollars using the exchange rate at the date of transactions. Gains and
losses resulting from the settlement of such transactions and from the translation of foreign exchange denominated monetary
assets and liabilities at year end exchange rates are recognised in profit or loss. The net foreign exchange gain/(loss) primarily
relates to the foreign currency movements arising from the Group’s trade and other payables.
Finance costs
Interest on borrowings, trade finance and commitment fees
Interest on finance lease
Unwinding of discount on provisions
Total finance costs
2018
$M
(24.5)
(8.0)
(9.4)
(41.9)
2017
$M
(17.4)
(7.9)
(6.0)
(31.3)
As at 31 December 2018 the Group had $1.6 million in net borrowing costs capitalised (2017: $0.7 million) amortising over the current
terms of the borrowings facility.
Impairment
Impairment of receivables
Total impairment
2018
$M
(1.4)
(1.4)
2017
$M
(0.5)
(0.5)
3. Segment information
The Group has identified its operating segments on the basis of how the Chief Operating Decision Maker reviews internal reports
about components of the Group to assess performance and determine the allocation of resources. The Group is organised into
business units based on operational activities and has three reportable segments:
Retail, Fuels and Marketing
The Retail, Fuels and Marketing segment consists of both retail and commercial sales and marketing of fuel and specialty products
in Australia under the Shell and Viva Energy brands as well as generation of substantial non-fuel income. All sales and marketing-
focused activities are included in this segment.
Refining
The Group’s Geelong Refinery in Corio, Victoria, refines crude oil into petrol, diesel and jet fuel. The refinery also manufactures
and produces specialty products such as liquid petroleum gas, bitumen, oils, and chemical products.
Supply, Corporate and Overheads
The Group owns and manages an integrated supply chain of terminals, storage facilities, depots, pipelines and distribution assets
throughout Australia in order to facilitate product distribution and delivery through wholesale and retail sites. This segment also
includes property expenses and corporate functions that facilitate business activity. These activities have been grouped as a
segment as they largely represent the overhead base of the business and undertake all the non-sales and non-manufacturing
activities within the Group.
Management monitors the operating results of its business segments separately for the purpose of making decisions about
resource allocation and performance assessment. The performance of operating segments is evaluated based on segment
profit and loss, and is measured consistently with profit or loss in the consolidated financial statements in accordance with the
Group’s accounting policies. Transfer prices between operating segments are on an arm’s length basis similar to transactions
with third parties.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Profit before interest, tax, depreciation and amortisation
932.6
124.5
(580.5)
Information about reportable segments
31 December 2018
Segment revenue:
Total segment revenue
Inter-segment revenue
External segment revenue
Gross profit
Net inventory gain/(loss)
Gross profit
Interest income
Depreciation and amortisation expenses
Finance costs
Segment profit before tax expense
Other material items:
Share of profit of associates
Capital expenditure
31 December 2017
Segment revenue:
Total segment revenue
Inter-segment revenue
External segment revenue
Gross profit
Net inventory gain/(loss)
Gross profit
Profit before interest, tax, depreciation and amortisation
Interest income
Depreciation and amortisation expenses
Finance costs
Retail,
Fuels and
Marketing
$M
Refining
$M
Supply,
Corporate
and
Overheads
$M
Total
segments
$M
16,046.4
4,495.2
15,090.7
35,632.3
–
(4,495.2)
(14,742.0)
(19,237.2)
16,046.4
–
348.7
16,395.1
1,304.4
301.5
–
–
1,304.4
301.5
39.1
(93.6)
(54.5)
2.7
(32.1)
(32.0)
(641.9)
–
(45.6)
(9.9)
877.1
–
45.9
–
(52.0)
–
72.5
–
84.5
63.5
110.9
63.5
241.3
1,645.0
(93.6)
1,551.4
476.6
2.7
(129.7)
(41.9)
307.7
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13,459.8
3,707.7
14,664.0
31,831.5
–
(3,707.7)
(14,218.4)
(17,926.1)
13,459.8
–
445.6
13,905.4
1,232.4
–
1,232.4
885.5
–
(34.9)
(15.5)
483.3
–
483.3
40.0
(8.7)
31.3
1,755.7
(8.7)
1,747.0
276.1
(575.5)
–
(46.2)
–
3.6
(26.2)
(15.7)
586.1
3.6
(107.2)
(31.3)
451.2
65.4
232.3
Segment profit before tax expense
835.1
229.9
(613.8)
Other material items:
Share of profit of associates
Capital expenditure
–
73.5
–
52.8
65.4
106.0
Geographical information
The Group’s country of domicile is Australia. The Group has operations in Australia and Singapore; however, all revenues
are generated in Australia. All of the Group’s non-financial non-current assets are located in Australia.
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Notes to the consolidated financial statements continued
4. Earnings per share
Basic earnings per share (EPS) is calculated by dividing the profit for the year attributable to ordinary equity holders of the Group
by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit
attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during
the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive options into
ordinary shares. In line with the requirements of AASB 133 Earnings per Share adjustments to the weighted average number of
ordinary and diluted shares are made for events, other than the conversion of potential ordinary shares, that have changed the
number of shares outstanding without a corresponding change in resources.
The following tables reflect the earnings and share data used in the basic and diluted EPS computations:
(a) Basic earnings per share
Total basic earnings per share attributable to the ordinary equity holders of the Group
(b) Diluted earnings per share
Total diluted earnings per share attributable to the ordinary equity holders of the Group
(c) Weighted average number of shares used as the denominator
Weighted number of ordinary shares used as the denominator in calculating
basic earnings per share
Adjustments for calculation of weighted diluted earnings per share:
Options
Weighted number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted earnings per share
2018
Cents
29.8
2018
Cents
29.4
2017
Cents
14.9
2017
Cents
14.6
2018
Number
2017
Number
1,944,535,168
1,944,535,168
29,211,925
37,488,003
1,973,747,093
1,982,023,171
(d) Information concerning the classification of securities
Ordinary shares
Ordinary shares at 31 December 2018 represent the 1,944,535,168 shares listed on the ASX as part of the IPO on 13 July 2018.
As part of the IPO process, the Group acquired all 809,323,406 shares in VEH from Viva Energy B.V that represented the number
of ordinary shares within the Group at the end of the previous period and immediately prior to the IPO.
Per the requirements of AASB 133, the 1,944,535,168 ordinary shares upon listing represent the denominator in calculating the
weighted average earnings per share for both 2018 and 2017 after adjusting for the change in ownership profile that ultimately
did not change the resources of the Group. As applicable, this approach has also been used for the adjustment to calculate
diluted earnings per share.
Any profit is available for distribution to the holders of Viva Energy Group Limited ordinary shares in equal amounts per share,
subject to the Group’s approved dividend strategy.
Options
Options granted to employees under the Group’s Long Term Incentive Plan are considered to be potential ordinary shares. They
have been included in the determination of diluted earnings per share if the exercise price of the options is lower than the listed
share price of Group shares as at 31 December 2018. The options have not been included in the determination of basic earnings
per share. Details relating to the options are set out in Note 32 Related party disclosures.
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Working capital and cash flow
5. Inventories
Crude for processing
Hydrocarbon finished products
Stores and spare parts
Total inventories
2018
$M
198.8
793.6
992.4
18.9
1,011.3
2017
$M
317.5
630.0
947.5
17.7
965.2
Inventories are stated at the lower of cost and net realisable value. Cost is based on the first-in, first-out (FIFO) principle
and includes the direct cost of acquisition or manufacture plus a proportionate share of appropriate functional overheads,
depreciation and amortisation. The inventory management system used by the Group is based on replacement cost methodology.
Certain management estimates are required to adjust replacement cost to the FIFO method in order to comply with accounting
standard requirements.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and the estimated costs necessary to make the sale. Net realisable value is determined based on market selling price under
existing contracts.
Impairment of inventories is recognised when net realisable value falls below carrying cost. This primarily occurs as a result of
movements in crude oil and refined product prices between the date of purchase and balance date. Impairment of inventories
during the year amounted to $27.7 million (2017: nil) and is recorded in net inventory gain/(loss) in the consolidated statement
of profit or loss.
During the year, a net inventory loss of $93.6 million (2017: $8.7 million loss) was recorded in net inventory gain/(loss) which
accounts for the net impact of movement in oil prices on inventory sold. Net inventory gains and losses within costs of goods
sold represent the difference between the cost of goods sold calculated using the replacement cost of inventory and the cost
of goods sold calculated on the FIFO method. Under the FIFO method, which is used to comply with accounting standard
requirements, the cost of inventory charged to the statement of profit and loss is based on its historical cost of purchase or
manufacture, rather than its replacement cost at the time of sale.
Fluctuations in foreign exchange and commodity prices (which are impacted by both the USD oil price and the foreign exchange
rate) can have a distorting effect on the Group’s underlying results, and the replacement cost of goods sold quantifies this impact.
Replacement cost of goods sold is a non-International Financial Reporting Standards measure, and is used by management
to present a clearer picture of the Group’s underlying business performance before impacts from movements in oil price and
foreign exchange. The Group’s replacement cost methodology is consistent with the methods used by other companies in
comparable industries.
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6. Cash and cash equivalents
Cash at bank
2018
$M
108.6
2017
$M
164.7
Cash and cash equivalents include cash deposits held at call with financial institutions. Cash at bank earns interest at floating
rates based on daily bank deposit rates during the year, and at the end of the reporting year there were no restrictions on cash
(2017: nil).
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Notes to the consolidated financial statements continued
7. Reconciliation of profit to net cash flows from operating activities
Profit
Adjustments for:
Net gain on other disposal of property, plant and equipment
Depreciation and amortisation
Non-cash interest and amortisation on long-term loans
Non-cash movement in financial assets
Non-cash share-based payment expense
Amortisation of finance lease
Unrealised loss/(gain) on derivatives
Unrealised foreign exchange movements
Share of associate’s profit not received as dividends or distributions
Non-cash employee share option taken up in reserve
Non-cash tax expense relating to IPO transaction cost offset against IPO reserve
2018
$M
579.6
(10.2)
129.7
1.6
–
–
0.3
(23.9)
24.4
(63.5)
1.9
0.1
2017
$M
289.7
(15.7)
107.2
0.6
(4.8)
0.2
0.4
16.4
(22.1)
(65.4)
–
–
Net cash flows from operating activities before movements in assets/liabilities
640.0
306.5
Movements in assets and liabilities:
Working capital balances
(Increase)/decrease in receivables*
Increase/(decrease) in other receivables arising from land sales
(Increase) in inventories*
Increase in payables*
Other
Decrease/(increase) in other assets*
(Increase) in deferred tax assets**
Decrease in post-employment benefits
(Decrease) in tax liability**
Increase/(decrease) in provisions*
Net cash flows from operating activities
31.0
(53.2)
(46.2)
299.6
(9.2)
(343.2)
1.9
(209.1)
(24.4)
287.2
(155.3)
53.2
(297.5)
243.4
1.0
(8.4)
1.0
(33.5)
51.7
162.1
* Movements in the assets and liabilities for the year ended 31 December 2017 have been adjusted for the assets and liabilities transferred from Shell Aviation
Australia Pty Ltd (Shell Aviation), which was acquired on 31 May 2017, as well as elimination of intercompany balances due to the acquisition. Refer to Note 27
Business combinations for further details.
** Figures exclude the tax impact of IPO transaction costs, which are offset against reserves.
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8. Trade and other receivables
Trade receivables
Trade receivables
Provision for impairment of receivables
Total trade receivables
Other receivables
Receivables from related parties
Consideration receivable
Other debtors
Total other receivables
Total receivables
2018
$M
914.0
(4.3)
909.7
170.0
–
59.0
229.0
2017
$M
955.6
(5.6)
950.0
69.8
49.4
95.8
215.0
1,138.7
1,165.0
Trade receivables
Trade receivables are non-interest-bearing and are generally on terms of 15 to 45 days. Trade receivables are amounts due from
customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognised initially at fair
value and are held with the objective to collect the contractual cash flows, and therefore subsequently measured at amortised cost
using the effective interest method. Due to the short-term maturity, the carrying amount approximates the fair value. Periodically,
the Group enters into factoring arrangements on specific trade receivable balances as part of their overall collections strategy.
At 31 December 2018 there were no outstanding trade receivables subject to factoring (2017: nil).
The Group applies the AASB 9 simplified approach to measuring trade receivable expected credit losses, which uses a lifetime
expected loss allowance for expected credit losses for all trade receivables. To measure the expected credit losses, trade
receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are
based on the payment profiles of sales over past periods using historical data and also using forward looking projections of
customer payment expectations. Trade receivables are often insured for events of non-payment through third party insurance,
which has also been factored into the expected loss rate calculations.
The loss allowance as at 31 December 2018 and 1 January 2018 (on adoption of AASB 9) was determined as follows for trade
receivables:
31 December 2018
Expected loss rate
Gross carrying amount –
trade receivables
Loss allowance
Total
$M
914.0
(4.3)
Current
$M
0.4%
874.0
(3.0)
1 January 2018
Expected loss rate
Gross carrying amount –
trade receivables
Loss allowance
Total
$M
955.6
(5.6)
Current
$M
0.5%
913.9
(4.1)
More than
30 days
but not
more than
60 days past
due
$M
More than
60 days
but not
more than
90 days past
due
$M
More than
90 days
but not
more than
120 days
past due
$M
Not more
than 30 days
past due
$M
More than
120 days
past due
$M
1.0%
2.0%
5.0%
10.0%
15.0%
28.6
(0.3)
2.7
(0.1)
3.1
(0.2)
1.9
(0.2)
3.7
(0.5)
More than
30 days but
not more
than 60
days past
due
$M
More than
60 days but
not more
than 90
days past
due
$M
More than
90 days but
not more
than 120
days past
due
$M
Not more
than 30
days past
due
$M
More than
120 days
past due
$M
1.0%
2.0%
5.0%
10.0%
15.0%
32.5
(0.3)
1.4
(0.1)
0.2
–
0.2
–
7.4
(1.1)
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Notes to the consolidated financial statements continued
8. Trade and other receivables continued
Trade receivables continued
Movements in the allowance for impairment of receivables were as follows:
31 December – calculated under AASB 139
Amounts restated through opening retained earnings
Opening loss allowance as at 1 January 2018 – calculated under AASB 9
Increase in loss allowance recognised in profit or loss during the year
Receivables written off as uncollectable
At 31 December
2018
$M
(5.6)
–
(5.6)
(1.4)
2.7
(4.3)
2017
$M
(6.0)
–
(6.0)
(0.5)
0.9
(5.6)
The creation and release of loss allowances for trade receivables has been included within impairment expense in the consolidated
statement of profit or loss. Amounts charged to the allowance account are generally written off when there is no reasonable
expectation of recovering additional cash.
Other receivables
Other receivables include receivables from related parties and other debtors of which the majority relates to GST receivable
balances and other specific receivable balances. Other receivables are measured at amortised cost as they are held with
the objective to collect contractual cash flows of principal and interest payments. Given the nature of the other receivable
balances and based on both previous history of collections and future expectations of receipts, management believes that
other receivables are fully collectable and has not applied a credit loss allowance to these balances.
Consideration receivable relates primarily to amounts relating to the recovery of certain costs from Shell. These were collected
in 2018.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included within trade and other receivables or trade and other payables in the
consolidated statement of financial position.
9. Prepayments
Head leases
Other prepayments
Total prepayments
2018
$M
50.1
20.9
71.0
2017
$M
48.6
13.6
62.2
Other prepayments primarily relate to prepaid council rates, insurance and shipping related costs.
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10. Trade and other payables
Trade payables
Amounts due to related parties
Amounts due to associates
Total trade and other payables
2018
$M
619.7
1,290.3
12.8
2017
$M
585.3
989.0
11.7
1,922.8
1,586.0
Trade payables and amounts due to related parties are non-interest-bearing and are normally settled in 30 to 60 days. Amounts
due to related parties are primarily for purchases of hydrocarbon. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months after the end of the reporting period. The carrying amounts of trade and other payables
are considered to be the same as their fair values, due to their short-term nature.
11. Short-term borrowings
Short-term bank loans (secured)
Net capitalised borrowing costs on short-term bank loans (secured)
Short-term finance lease liability
Total short-term borrowings
2018
$M
–
–
7.2
7.2
2017
$M
240.0
(0.7)
7.1
246.4
fi
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a
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c
i
a
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s
t
a
t
e
m
e
n
t
s
Borrowings are initially recognised at fair value, net of transaction costs incurred, and are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the consolidated
statement of profit or loss over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the end of the reporting period.
On 26 March 2018, the Group refinanced the short-term US$900 million secured borrowing base facility and replaced it with
a long-term US$700 million unsecured revolving credit facility, which has an initial two-year term and a one-year extension
option. The first utilisation date under the new facility was 28 March 2018. For further details, refer to Note 19 Long-term
borrowings. The short-term bank loans in 2017 were secured against Group cash, inventory and receivable assets totalling
US$1.5 billion at 31 December 2017.
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Notes to the consolidated financial statements continued
Long-term assets and liabilities
12. Property, plant and equipment
Cost
As at 1 January 2017
Additions
Acquisition of Aviation business
Disposals*
Transfers
As at 31 December 2017
Additions
Disposals
Transfers**
As at 31 December 2018
Accumulated depreciation
As at 1 January 2017
Depreciation
As at 31 December 2017
Depreciation
As at 31 December 2018
Construction
in progress
$M
Freehold
land
$M
Freehold
buildings
$M
Leasehold
buildings
$M
Plant and
equipment
$M
Total
$M
209.6
158.2
10.4
(3.2)
(153.0)
222.0
230.4
–
(180.3)
272.1
–
–
–
–
–
166.7
157.6
58.6
807.6
1,400.1
5.6
3.2
(59.7)
7.6
123.4
–
(10.2)
(0.3)
112.9
–
–
–
–
–
4.4
28.4
(1.1)
13.8
203.1
2.1
(0.3)
1.2
206.1
(29.7)
(10.0)
(39.7)
(11.1)
(50.8)
–
–
–
8.1
66.7
–
–
(0.6)
66.1
(7.7)
(3.2)
(10.9)
(3.2)
(14.1)
73.4
71.2
(10.8)
123.5
241.6
113.2
(74.8)
–
1,064.9
1,680.1
8.8
(2.2)
129.1
241.3
(12.7)
(50.9)
1,200.6
1,857.8
(137.6)
(83.6)
(221.2)
(100.4)
(321.6)
(175.0)
(96.8)
(271.8)
(114.7)
(386.5)
* Disposals in 2017 included a sales transfer of $53.2 million to the immediate parent entity.
** Net transfers out of $50.9 million represents the completed JDE ERP system transferred from construction in progress to intangibles during the 2018 period.
Net book value
As at 31 December 2017
Less: Assets held for sale
Net book value as at 31 December 2017
As at 31 December 2018
Less: Assets held for sale
Net book value as at 31 December 2018
222.0
–
222.0
272.1
–
272.1
123.4
(8.1)
115.3
112.9
(4.0)
108.9
163.4
(0.3)
163.1
155.3
–
155.3
55.8
–
55.8
52.0
–
52.0
843.7
(1.3)
842.4
1,408.3
(9.7)
1,398.6
879.0
1,471.3
(0.1)
(4.1)
878.9
1,467.2
All property, plant and equipment is stated at historical cost less depreciation, with the exception of construction in progress
and freehold land, which are not subject to depreciation. Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Depreciation on assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual
values, over their estimated useful lives, as follows:
• Buildings
• Plant and equipment
20 years
5 to 15 years
• Supply and refining infrastructure
20 to 30 years
• Land
Not depreciated
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Minimum operating stock which is the minimum level of inventories held in the entire supply chain and is necessary to operate
supply and refining as a going concern, is treated as part of property, plant and equipment. It is valued at cost and is depreciated
over the estimated useful life of the related asset to its estimated residual value.
Assets held for sale
The Group has a number of in use property, plant and equipment assets that are classified as held for sale from continuing
operations. These assets include retail, supply chain and aviation assets totalling $4.1 million (2017: $9.7 million) and meet the
AASB 5 Non-current Assets Held for Sale and Discontinued Operations classification requirements.
13. Long-term receivables
Receivables
Loans to related parties
Total non-current receivables
14. Goodwill and other intangible assets
2018
$M
9.0
8.5
17.5
Goodwill
$M
Software
$M
Customer
contracts
$M
Joint
venture
rights
$M
Net book value
As at 1 January 2017
Additions
Amortisation for the year
Impairment for the year
As at 31 December 2017
Cost
Accumulated amortisation and impairment
As at 31 December 2017
Additions
Amortisation for the year
Impairment for the year
As at 31 December 2018
Cost
Accumulated amortisation and impairment
As at 31 December 2018
–
–
–
–
–
–
–
–
50.9
(1.4)
–
49.5
50.9
(1.4)
49.5
8.9
20.9
(6.0)
–
23.8
35.8
(12.0)
23.8
2.1
(5.9)
–
20.0
37.9
(17.9)
20.0
–
213.3
–
–
213.3
213.3
–
213.3
9.8
–
–
223.1
223.1
–
223.1
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fi
n
a
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c
i
a
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s
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a
t
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m
e
n
t
s
2017
$M
6.7
5.0
11.7
Total
$M
8.9
386.3
(10.5)
–
384.7
401.2
(16.5)
384.7
62.8
(15.0)
–
152.1
(4.5)
–
147.6
152.1
(4.5)
147.6
–
(7.7)
139.9
432.5
152.1
(12.2)
139.9
464.0
(31.5)
432.5
VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018Directors’ reportConsolidated financial statementsNotes to the consolidated financial statementsAuditor’s independence declarationDirectors’ declarationIndependent auditor’s reportDisclosuresAdditional informationCorporate directory
Notes to the consolidated financial statements continued
14. Goodwill and other intangible assets continued
(a) Goodwill
Goodwill arises when the fair value of the consideration paid for a business acquisition exceeds the fair value of the identifiable
assets, liabilities and contingent liabilities acquired. Where consideration is less than the fair value of acquired net assets, the
difference is recognised immediately in the consolidated statement of profit and loss. Goodwill is not amortised and is measured
at cost less any impairment losses. In accordance with Australian Accounting Standard requirements, goodwill is allocated to a
Cash-Generating Unit (CGU) and is tested annually for impairment. In respect of equity accounted investees, the carrying amount
of goodwill is included in the carrying amount of the investment in the associate.
A CGU level summary of the goodwill allocation is presented below:
Marketing and Supply
Refining
Total goodwill recognised
2018
$M
223.1
–
223.1
2017
$M
213.3
–
213.3
Goodwill represents other intangible assets that did not meet the criteria for recognition as separately identifiable assets at the date
of the Shell Aviation acquisition in 2017, with an additional $9.8 million recognised in 2018 due to an adjustment to the purchase price
allocation upon finalisation of the accounting for the acquisition, in line with AASB 3 Business Combinations. The Group acquired
Shell Aviation as its operations align with the Group’s core operations and provides additional channels and infrastructure to
support the sale and growth of the Group’s aviation fuel products. The recognised goodwill has been allocated to the Marketing
and Supply CGU and is tested for impairment annually based on a value-in-use calculation. The calculation uses pre-tax cash
flow projections based on financial budgets approved by management with conservative growth rates that do not exceed
industry expectations.
Key assumptions in the value-in-use calculation:
Assumption
Cash flow
Approach used to determining values
Earnings before interest, tax, depreciation and amortisation adjusted
for working capital movement expectations and capital spend projections
Estimated long-term average growth rate
Pre-tax discount rate
3%
8.4%
The above key assumption values used in the goodwill assessment represent management’s expectations of future trends within
the industry of which the Marketing and Supply CGU operates, based on both external and internal data sources. Management
has considered and assessed reasonably possible changes in the key assumptions used and has not identified any instances
that could cause the carrying amount of the Marketing and Supply CGU to exceed its recoverable amount.
There were no goodwill impairment losses recognised during the year ended 31 December 2018 (2017: nil).
(b) Other intangibles
The Group capitalises amounts paid for the acquisition of identifiable intangible assets, such as software, customer contracts
and joint venture rights, where it is considered that they will provide benefit in future periods through revenue generation or
reductions in costs. These assets, classified as finite life intangible assets, are carried in the consolidated statement of financial
position at the fair value of consideration paid less accumulated amortisation and impairment losses.
Intangible assets with finite useful lives are amortised on a straight-line basis over their useful lives. Amortisation for the period
is included within the depreciation and amortisation expenses in the statement of profit and loss. The estimated useful lives in the
current and comparative periods are reflected by the following amortisation periods:
• Software
• Customer contracts
• Joint venture rights
5 to 12 years
6 to 10 years
20 years
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(i) Software
During 2018 the Group successfully transitioned from the legacy SAP enterprise platform to Oracle JDE following the 18-month
planning and transitioning process, with a total project cost of $50.9 million. As at 31 December 2018, the carrying amount of this
software was $49.5 million (2017: nil).
The Group estimates the useful life of the software to be at least 12 years based on the expected technical obsolescence of
such asset. This useful life profile conservatively aligns with the written commitment to provide premier support of the platform,
underpinning the asset integrity of the system until at least December 2030, not including extended support option periods
generally available. The actual useful life may be shorter or longer than 12 years, depending on technical innovations.
(ii) Customer contracts and joint venture rights
The customer contracts and joint venture rights were acquired as part of a business combination, namely, the Shell acquisition in
2014 and the Shell Aviation acquisition in 2017. These intangible assets were recognised at their fair value at the date of acquisition
and are subsequently amortised on a straight-line based on the timing of projected cash flows of the contracts over their estimated
useful lives.
15. Provisions
At 1 January 2018
Additions (write-back)
Utilised
Unwinding of discount
At 31 December 2018
Current
Non-current
Employee
benefits
$M
Restruc-
turing
provision
$M
Asset
retirement
obligation
$M
Environ-
mental
remediation
$M
98.4
25.8
(53.0)
2.2
73.4
67.0
6.4
4.8
10.5
(12.8)
–
2.5
2.5
–
91.9
(2.7)
(4.7)
6.2
90.7
12.0
78.7
51.2
1.0
(12.0)
0.8
41.0
20.9
20.1
Employee
benefits
$M
Restruc-
turing
provision
$M
Asset
retirement
obligation
$M
Environ-
mental
remediation
$M
At 1 January 2017
Additions (write-back)
Utilised
Unwinding of discount
Transfers from Shell Aviation acquisition
At 31 December 2017
Current
Non-current
86.7
44.2
(41.1)
2.4
6.2
98.4
89.8
8.6
6.9
6.8
(8.9)
–
–
4.8
4.6
0.2
94.7
(10.8)
(1.3)
3.2
6.1
91.9
16.8
75.1
35.0
20.6
(5.9)
0.1
1.4
51.2
26.4
24.8
fi
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
Other
$M
75.1
22.5
(8.1)
0.2
89.7
20.8
68.9
Other
$M
33.5
43.0
(2.1)
0.3
0.4
75.1
14.5
60.6
Total
$M
321.4
57.1
(90.6)
9.4
297.3
123.2
174.1
Total
$M
256.8
103.8
(59.3)
6.0
14.1
321.4
152.1
169.3
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can
be made of the amount of the obligation. Provisions are discounted using a current pre-tax rate that reflects, when appropriate,
the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised
as a finance cost.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018Directors’ reportConsolidated financial statementsNotes to the consolidated financial statementsAuditor’s independence declarationDirectors’ declarationIndependent auditor’s reportDisclosuresAdditional informationCorporate directory
Notes to the consolidated financial statements continued
15. Provisions continued
(a) Employee benefits
Liabilities for wages and salaries, including annual leave and sick leave expected to be settled within 12 months of the end of the
year, are measured at the amounts expected to be paid.
Liabilities for long service leave and annual leave that are not expected to be settled within 12 months of the end of the year are
measured at present value. In determining present value, consideration is given to the expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are adjusted for future wage and inflation
movement expectations, and discounted using market yields of corporate bonds.
(b) Asset retirement obligation – significant estimate
The present value of costs for the future dismantling and removal of assets, and restoration of the site on which the assets are
located, is capitalised and depreciated over the useful life of the asset. Subsequent accretion to the amount of a provision due
to unwinding of discounting is recognised as a finance cost.
The costs for the future dismantling and removal of assets are based upon management’s best estimate using actual costs incurred
in similar past projects inflated to the estimated end of useful life date and discounted using an appropriate discount rate.
The Group has recognised a provision associated with plant and equipment including tanks at retail service station sites and fuel
storage terminals. In determining the fair value of the provision, assumptions and estimates are made in relation to discount rates,
the expected cost to dismantle and remove the assets from the site and the expected timing of those costs. The carrying amount
of the provision as at 31 December 2018 was $90.7 million (2017: $91.9 million). The Group estimates that the costs would be realised
upon exit of the sites or disposal of the assets.
(c) Environmental provision – significant estimate
Provisions for environmental remediation resulting from ongoing or past operations or events are recognised in the period in
which an obligation, legal or constructive, to a third party arises and the amount can be reasonably measured. Measurement of
liabilities is based on current legal requirements and existing technology. Liabilities are determined independently of expected
insurance or other recoveries.
Where environmental impact studies have been completed, the result of this is used to estimate cost at the expected time of exit
from the site. In other cases, estimates are based on management experience of remediation at similar sites projected over the
estimated remaining occupancy of the site, or the remaining term of the lease.
16. Commitments and contingencies
(a) Capital commitments
At 31 December 2018, the Group had capital expenditure contracted for at the reporting date but not recognised as liabilities related
to property, plant and equipment totalling $40.2 million (2017: $81.6 million). Included within the total capital commitments is
$9.6 million (2017: $9.2 million) in commitments, which represents the Group’s share of the contracts entered into by associate
companies totalling $22.3 million for retail outlets, an investment property and capital improvements. Refer to Note 28 Interests
in associates and joint operations for further information.
(b) Lease commitments
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception
of the lease against the requirements of the accounting standards.
(i) Finance lease – Group as a lessee
A lease that transfers substantially all the risks and rewards incidental to ownership to the Group is classified as a finance lease.
Finance leases are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present
value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in
finance costs in the consolidated statement of profit or loss.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain
ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the
lease term.
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Future minimum lease payments under finance lease are as follows:
Within one year
After one year but not more than five years
More than five years
Total minimum lease payments
Less: Finance charges
Present value of minimum lease payments
2018
2017
Minimum
payments
$M
Present
value of
payments
$M
Minimum
payments
$M
Present
value of
payments
$M
7.9
33.5
102.7
144.1
(93.3)
50.8
7.2
21.1
22.5
50.8
–
50.8
7.7
32.7
111.3
151.7
(101.1)
50.6
7.1
20.6
22.9
50.6
–
50.6
(ii) Operating lease – Group as a lessee
A lease in which the Group does not transfer substantially all the risks and rewards of ownership of an asset is classified as an
operating lease. Operating lease payments are recognised as an operating expense in the consolidated statement of profit
or loss on a straight-line basis over the lease term.
Future minimum lease expenses expected to be paid in relation to non-cancellable leases as lessee are as follows:
fi
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
Within one year
After one year but not more than five years
More than five years
Total
2018
$M
303.0
937.3
1,675.5
2,915.8
2017
$M
282.0
936.7
1,892.8
3,111.5
Within the above commitments, the following are minimum lease payments in relation to non-cancellable operating leases payable to
Viva Energy REIT are as follows:
Within one year
After one year but not more than five years
More than five years
Total
2018
$M
135.7
581.3
1,376.5
2,093.5
2017
$M
131.4
562.7
1,542.2
2,236.3
Standards issued but not yet effective as at 31 December 2018 impacting leases
AASB 16 Leases (effective 1 January 2019)
AASB 16 Leases represents a significant change to how lessees account for operating leases. Under the new standard, as a lessee
the Group will be required to:
• recognise all right of use assets and lease liabilities, with the exception of low value and short-term leases, on the consolidated
statement of financial position. The asset/liability is initially measured at the present value of future lease payments for the lease
term, which includes any lease extension options if the Group is reasonably certain that it will exercise the option;
• recognise depreciation of right to use assets and interest on lease liabilities in the consolidated statement of profit and loss over
the lease term; and
• present separately the total cash paid into a principal portion and interest portion within the consolidated statement of cash flows.
The adoption of AASB 16 will therefore result in higher assets and liabilities in the consolidated statement of financial position and
charges to the consolidated statement of profit and loss will be included in depreciation and interest, which are excluded from profit
before interests, taxes, depreciation and amortisation (although included in profit before income tax). Under AASB 16, lessees
will have one accounting model for accounting for leases, which is similar to the current finance lease model in AASB 117 Leases.
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Notes to the consolidated financial statements continued
16. Commitments and contingencies continued
(b) Lease commitments continued
(ii) Operating lease – Group as a lessee continued
Standards issued but not yet effective as at 31 December 2018 impacting leases continued
An early estimate of the impact on the 2019 results was included in the Prospectus forecast financial information. The Group has
a work program in place and continues to progress work on the impact of the new standard, which has included:
• collating a complete list of applicable lease arrangements to which the standard applies;
• review procedures to identify key characteristics of existing contractual arrangements;
• determination of lease terms to be capitalised and the inclusion of option extension periods where appropriate;
• determination of an appropriate discount rate to be applied to both initial implementation for existing leases and a methodology
to be applied to new leases going forward;
• appropriate initial implementation methodology (full retrospective or simplified prospective); and
• impact (if any) on existing sub-lease/rental income arrangements and their classification.
Depending on the methodology and assumptions adopted as part of the approach, it is expected that the impact range on the
balance sheet would be between $2.1 billion and $2.6 billion had the Group early adopted the changes as at 31 December 2018.
The Group is in a position to support the system, process and reporting requirements needed to be able to meet the requirements
of the new standard when it becomes effective. It is expected that the Group will adopt the fully simplified approach which
allows the liability to be calculated at transition date based on the present value of future payments at transition date.
The application of AASB 16 Leases will also affect accounting for the Group’s leasing arrangements where it acts as sub-lessor.
Although lessor accounting is not significantly changing under AASB 16 as the Group will now be recognising right of use assets
for the head lease arrangement, a reassessment of the sub-lease will need to be made to assess whether this now represents a
finance lease of the recognised right of use asset. Where the lease terms are substantially matched, it is anticipated that these will
represent finance leases and the right of use asset will be derecognised and replaced with a finance lease receivable. For such
leases, operating lease rental income will no longer be recorded and will instead be replaced with interest income on the finance
lease receivable balance.
(iii) Operating lease – Group as a lessor
The Group leases out various service station sites, office premises, vehicles, shipping vessels and storage facilities under non-
cancellable operating leases expiring within two to 16 years. The leases have varying terms, escalation clauses and renewal rights.
On renewal, the terms of the leases are renegotiated.
Future minimum lease income expected to be received in relation to non-cancellable leases as lessor are as follows:
Within one year
After one year but not more than five years
More than five years
Total
2018
$M
142.1
510.6
749.5
2017
$M
148.7
490.7
947.9
1,402.2
1,587.3
(c) Guarantees
As at 31 December 2018, guarantees amounting to $58.5 million (2017: $51.5 million) have been given in respect of the Group’s
share of workers compensation, sureties for major contracts and other matters including government works.
Under the terms of the Deed of Cross Guarantee entered in accordance with ASIC Instrument 2016/785, each Australian group
entity guarantees to each creditor payment in full of any debt in accordance with the Deed. Parties to the deed are identified
in Note 30 Deed of Cross Guarantee. No liabilities have been recognised in the consolidated statement of financial position in
respect of financial guarantee contracts.
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(d) Contingencies and other disclosures
(i) Stamp duty – Viva Energy REIT
On 24 September 2018, Viva Energy REIT received an assessment from the Victorian State Revenue Office (SRO) for $31.2 million.
The assessment relates to the transfer of properties prior to the completion of the Viva Energy REIT IPO in August 2016. Pursuant
to the arrangements between Viva Energy REIT and the Group at the time, which were disclosed in the Prospectus, any such costs
are payable by the Group.
The Group lodged an objection to the assessment on 2 November 2018 and considers that it has strong prospects of having the
assessment set aside. The SRO advised in a letter dated 22 November 2018 that it will not take recovery action while the objection
and any appeal process are continuing.
Management does not consider it probable that the Group has a present obligation in relation to the assessment as at 31 December
2018, and as a result has not recorded a provision in the statement of financial position.
As at 31 December 2018, the Group has other contingent liabilities of $37.5 million (2017: $13.3 million), which include the above
stamp duty amount of $31.2 million.
It is management’s view that these contingent liabilities are considered not probable.
Capital funding and financial risk management
For the purpose of the Group’s capital management, capital includes issued capital and all other equity reserves. The primary
objective of the Group’s capital management is to maximise the shareholder value.
The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements
of the financial covenants. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders,
return capital to shareholders or issue new shares.
In order to achieve this overall objective, the Group’s capital management, amongst other things, aims to ensure that it meets
financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Under the
terms of the major borrowing facilities, the Group is required to comply with the following financial covenants:
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• the interest cover ratio must not be less than 3.0x;
• the liquidity ratio must not be more than 60%;
• the leverage ratio must not be more than 2.0x; and
• the tangible net worth must not be less than $1.2 billion.
Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been
no breaches of the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2018
and 2017.
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Notes to the consolidated financial statements continued
17. Financial assets and liabilities
This table provides a summary of the Group’s financial instruments, how they are classified and measured, and reference to relevant
disclosure notes within the financial statements.
The Group holds the following financial instruments at the end of the reporting period:
Financial assets
Financial assets held at amortised cost
Trade and other receivables
Long-term receivables
Cash and cash equivalents
Financial assets at fair value through profit and loss
Derivative assets
Financial liabilities
Financial liabilities held at amortised cost
Trade and other payables
Borrowings
Financial liabilities at fair value through profit and loss
Derivative liabilities
Notes
2018
$M
2017
$M
8
13
6
18
Notes
10
11,19
1,138.7
1,165.0
17.5
108.6
11.7
164.7
15.5
–
1,280.3
1,341.4
2018
$M
2017
$M
1,922.8
159.2
1,586.0
289.9
18
0.9
9.3
2,082.9
1,885.2
Financial assets
(a) Initial recognition and subsequent measurement
From 1 January 2018, the Group classifies its financial assets, at initial recognition, as subsequently measured at amortised cost,
fair value through other comprehensive income (OCI) and fair value through profit or loss. The classification of financial assets
at initial recognition depends on the financial assets contractual cash flow characteristics and business model the Group uses
to manage them. At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash
flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred
to as the SPPI test and is performed at an instrument level.
Subsequent measurement of financial assets depends on the Group’s business model for managing the asset and its associated
cash flow characteristics. The Group’s three measurement categories are as follows:
(i) Amortised cost
This category is the most relevant to the Group. Financial assets are measured at amortised cost if the asset is held within a business
model to collect contractual cash flows where those cash flows represent solely payments of principal and interest. Financial assets
at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses
are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group’s financial assets at amortised
cost include trade and other receivables, long-term receivables and cash and cash equivalents.
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(ii) Fair value through other comprehensive income (FVOCI)
The Group measures financial assets at FVOCI if the financial asset is held within a business model to collect contractual cash
flows and for selling the financial assets, where those cash flows represent solely payments of principal and interest. Movements
in the carrying amount are taken through OCI, except for the recognition of impairment gains and losses, interest income and
foreign exchange gains and losses, which are recognised in profit or loss. Upon derecognition, the cumulative fair value change
recognised in OCI is recycled to profit or loss. The Group currently holds no financial assets measured at FVOCI.
(iii) Fair value through profit and loss (FVPL)
Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL and include financial assets held for trading,
financial assets designated upon initial recognition at FVPL, or financial assets required to be measured at fair value. Financial assets
at FVPL are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of
profit or loss. During the year, derivative assets were the only assets measured at FVPL.
(b) Derecognition
A financial asset is derecognised from the Group’s consolidated statement of financial position when the rights to receive cash
flows from the asset have expired, or the Group has transferred its rights to receive cash flows from the asset and has transferred
substantially all the risks and rewards of the asset and/or control of the asset.
(c) Impairment of financial assets
From 1 January 2018, the Group assesses on a forward-looking basis the expected credit losses associated with its financial assets
carried at amortised cost and FVOCI. The impairment methodology applied depends on the determined risk profile of each
financial asset and the future expected credit risks relating to the identified asset. For trade receivables, the Group applies
a simplified approach to calculating expected credit losses as permitted by AASB 9, recognising a loss allowance based on
expected credit losses at each reporting date. The Group has established a provision matrix that is based on historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic environment. See Note 8 Trade and
other receivables for further details.
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Financial liabilities
(d) Initial recognition and subsequent measurement
Financial liabilities are classified, at initial recognition, as financial liabilities measured at amortised cost (which for the Group
are trade and other payables or borrowings) or as financial liabilities at FVPL. All financial liabilities are recognised initially at fair
value and, in the case of payables and borrowings, net of directly attributable transaction costs. The subsequent measurement
of financial liabilities depends on their classification, as described below:
(i) Amortised costs
This is the category most relevant to the Group and includes trade and other payables and borrowings. Trade payables and amounts
due to related parties are non-interest bearing and are normally settled in 30 to 60 days. Amounts due to related parties are
primarily for purchases of hydrocarbon. Trade and other payables are presented as current liabilities unless payment is not due
within 12 months after the end of the reporting period. They are recognised initially as fair value and subsequently measured
at amortised cost using the effective interest method. Due to their short-term nature, the carrying amounts of trade and other
payables are considered to be the same as their fair values. Borrowings are initially recognised at fair value net of transaction
costs incurred, and subsequently measured at amortised cost. Any differences between the proceeds (net of transaction costs)
and the redemption amount is recognised in the statement of profit or loss over the period of the borrowings using the effective
interest method.
(ii) Fair value through profit and loss (FVPL)
Derivatives are the Group’s only financial liabilities that are measured at FVPL. They are classified as held for trading and are
entered into by the Group to mitigate exposure to the effects of changes in foreign exchange and commodity price movements.
Changes in fair value of any derivative liabilities are recognised immediately in realised/unrealised (loss)/gain on derivatives in
the consolidated statement of profit or loss.
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Notes to the consolidated financial statements continued
17. Financial assets and liabilities continued
Financial liabilities continued
(e) Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition
of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
AASB 9 Financial Instruments – Impact of Adoption
Until 31 December 2017, the Group classified its financial assets into one of the following categories: financial assets at fair value
through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets.
The classification depended on the purpose for which the investments were acquired. Management determined the classification
of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluated this designation at the
end of each reporting period. A significant impact of the new standard related to held-to-maturity investments and available-for-sale
financial assets, which changed measurement category under the new standard. This did not impact the Group as there were
no held-to-maturity or available-for-sale financial instruments held at the time of adoption. Under AASB 9, the Group continued
to measure at either amortised cost or FVPL all financial instruments previously held at these measurement classifications under
AASB 139. Therefore, the classification and measurement requirements did not have a significant impact on the Group.
On 1 January 2018 (the date of initial application of AASB 9), the Group’s management assessed which business models apply
to the financial assets held by the Group and classified its financial instruments into the appropriate AASB 9 categories.
Financial assets
Trade and other receivables
Amortised cost
Amortised cost
1,165.0
1,165.0
Measurement category
Original (AASB 139)
New (AASB 9)
Carrying amount
Original
$M
New
$M
Long-term receivables
Cash and cash equivalents
Derivative assets
Financial liabilities
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVPL
FVPL
11.7
164.7
–
11.7
164.7
–
Trade and other payables
Amortised cost
Amortised cost
1,586.0
1,586.0
Borrowings
Derivative liabilities
Amortised cost
Amortised cost
FVPL
FVPL
289.9
9.3
289.9
9.3
AASB 9 was generally adopted without restating comparative information, with adjustments arising from the new expected credit
loss model not material. While trade and other receivables and cash and cash equivalents are subject to the new impairment
requirements of AASB 9, the identified impairment loss was not material. Refer to Note 8 Trade and other receivables for further
information on the expected credit loss calculation.
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18. Derivative assets and liabilities
Derivatives are classified as held for trading and accounted for at fair value through profit or loss. The Group has the following
derivative financial instruments at the end of the reporting period:
Derivative assets
Derivative liabilities
2018
$M
15.5
0.9
2017
$M
–
9.3
Management has determined the fair value, which is classified as Level 2 in the fair value hierarchy, using the present value
of estimated future settlements based on market quoted information.
Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss category are presented
in profit or loss within other income or other expenses in the period in which they arise. Interest income from these financial assets
is recognised in the consolidated statement of profit or loss.
19. Long-term borrowings
Long-term bank loans
Net capitalised borrowing costs on long-term bank loans
Long-term finance lease liability
Total non-current borrowings
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2018
$M
110.0
(1.6)
43.6
152.0
2017
$M
–
–
43.5
43.5
On 26 March 2018, the Group replaced its borrowing facility with a US$700 million syndicated, unsecured revolving credit facility,
which has an initial two-year term and a one-year extension option.
At the end of the reporting period, the Group had access to the unsecured facility limit amounting to $991.8 million (2017: $1,155.3
million secured) that was in place primarily for working capital purposes. The amount drawn at 31 December 2018 is $110.0 million
unsecured (2017: $240.0 million secured). The weighted average interest rate on long-term bank loans in 2018 was 2.73% (2017: 2.81%).
This borrowing facility is subject to covenant arrangements disclosed under Capital funding and financial risk management
on page 83. Finance lease liability represents the present value of the lease payments under the finance lease at reporting date.
For further details, refer to Note 16 Commitments and contingencies.
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Notes to the consolidated financial statements continued
20. Consolidated net debt
Net debt
Cash and cash equivalents
Finance lease liabilities – repayable within one year
Borrowings – repayable within one year
Finance lease liabilities – repayable after one year
Borrowings – repayable after one year
2018
$M
108.6
(7.2)
–
(43.6)
(108.4)
(50.6)
Analysis of changes in
consolidated net debt
Net debt as at 1 January 2017
Cash flows
Other non-cash movements
Net debt as at 31 December 2017
Net debt as at 1 January 2018
Cash flows
Other non-cash movements
Net debt as at 31 December 2018
Other assets
Liabilities from financing activities
Finance
leases due
within
1 year
$M
Cash/
overdrafts
$M
Finance
leases due
after 1 year
$M
Borrowings
due within
1 year
$M
Borrowings
due after
1 year
$M
426.3
(261.6)
–
164.7
164.7
(56.1)
–
108.6
(6.9)
7.5
(7.7)
(7.1)
(7.1)
7.7
(7.8)
(7.2)
(43.2)
–
(0.3)
(43.5)
–
(240.0)
0.7
(239.3)
(43.5)
(239.3)
–
(0.1)
(43.6)
–
239.3
–
2.5
–
(2.5)
–
–
132.5
(240.9)
(108.4)
2017
$M
164.7
(7.1)
(239.3)
(43.5)
–
(125.2)
Total
$M
378.7
(494.1)
(9.8)
(125.2)
(125.2)
84.1
(9.5)
(50.6)
21. Contributed equity and reserves
Ordinary shares are classified as equity. These shares entitle the holder to participate in dividends, and to share in the proceeds
of winding up the Group in proportion to the number of and amounts paid on the shares held.
Issued and paid up capital
Cost per share
Movements in ordinary share capital
At 1 January 2017
At 31 December 2017*
At 1 January 2018
Restructure of the Group**
IPO issuance**
At 31 December 2018
2018
$M
4,861.3
2017
$M
645.2
$2.5000
$0.7972
Shares
809,323,406
809,323,406
809,323,406
(809,323,406)
1,944,535,168
1,944,535,168
$M
645.2
645.2
645.2
(645.2)
4,861.3
4,861.3
* Refers to ordinary shares in VEH as at 31 December 2017.
** On 13 July 2018 the Company was part of an IPO and listed a total of 1,944,535,168 shares on the ASX. As part of the IPO process, the Group acquired 100%
of the shares in VEH from Viva Energy B.V. The shares in VEH were transferred to the Group on 17 July 2018, immediately prior to the allotment of shares
pursuant to the IPO on 18 July 2018.
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The following table shows a breakdown of the reserve balances and the movements in these reserves during the year.
Post-
employment
benefits
reserve
SBP
reserve
$M
IPO
reserve
$M
Cash flow
hedge
reserve
$M
At 1 January 2018
Movement in share-based payment reserve
Remeasurement of retirement benefit obligations
Recognition of IPO reserve
Unrealised (losses)/gains on cash flow hedges
recognised by Viva Energy REIT
8.7
–
(1.4)
–
–
1.2
1.9
–
–
–
–
–
–
(4,235.2)
–
At 31 December 2018
7.3
3.1
(4,235.2)
1.6
–
–
–
(3.2)
(1.6)
At 1 January 2017
Movement in share-based payment reserve
Remeasurement of retirement benefit obligations
Unrealised (losses)/gains on cash flow hedges
recognised by Viva Energy REIT
At 31 December 2017
Post-
employment
benefits
reserve
SBP
reserve
$M
IPO
reserve
$M
Cash flow
hedge
reserve
$M
8.8
–
(0.1)
–
8.7
–
1.2
–
–
1.2
–
–
–
–
–
–
–
–
1.6
1.6
Total
$M
11.5
1.9
(1.4)
(4,235.2)
(3.2)
(4,226.4)
Total
$M
8.8
1.2
(0.1)
1.6
11.5
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22. Dividends declared and paid
Viva Energy Holding Pty Ltd declared and paid a dividend of $13.5 million (1.66 cents per share) on 29 March 2018, to the then
sole shareholder of the Group, Viva Energy BV, such dividend being related to certain properties surplus (or soon to be surplus)
to the operational requirements of Viva Energy, which were transferred out of the Group.
During the IPO process the Directors announced their intention, in respect of the year ended 31 December 2018, to target
a dividend payout ratio of 60% of the Underlying NPAT (RC) in respect of the six months ending 31 December 2018.
Dividend franking account
The balance of the franking account of the Australian consolidated tax group, headed by Viva Energy Group Limited, is $46.4 million
at 31 December 2018 based on a tax rate of 30%.
The dividend determined on 27 February 2019 will be fully franked and will reduce the franking credits available to the Group.
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Notes to the consolidated financial statements continued
23. Fair value of financial assets and liabilities
The Group’s accounting policies and disclosures may require the measurement of fair values for both financial and non-financial
assets and liabilities. The Group has an established framework for fair value measurement. When measuring the fair value of an
asset or a liability, the Group uses market observable data where available.
Fair values are categorised into different levels in a fair value hierarchy based on the following valuation techniques:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability are categorised in different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input
that is significant to the entire measurement.
(a) Fair value measurement hierarchy for the Group
31 December 2018
Derivative assets
Derivative liabilities
Total at 31 December 2018
31 December 2017
Derivative liabilities
Total at 31 December 2017
Quoted
in active
markets
(Level 1)
$M
Significant
observable
inputs
(Level 2)
$M
Significant
unobser-
vable inputs
(Level 3)
$M
–
–
–
–
–
15.5
0.9
14.6
9.3
9.3
–
–
–
–
–
There were no transfers between levels during the 2018 and 2017 years.
(b) Estimation of fair values
Derivative assets and liabilities
The Group enters into derivative financial instruments with financial institutions with investment grade credit ratings. Foreign
exchange forward contracts and commodity forward contracts are valued using valuation techniques, which employ the use of
market observable inputs. As at 31 December 2018, the marked-to-market value of derivative asset positions is net of a credit
valuation adjustment attributable to derivative counterparty default risk.
24. Financial risk management
The Group’s principal financial liabilities, other than derivatives, comprise current and non-current borrowings and trade and
other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group’s principal financial
assets include loans, trade and other receivables, and cash and cash equivalents that were derived directly from its operations.
The Group also holds financial assets and enters into derivative transactions.
Exposure to foreign currency risk, interest rate risk, liquidity risk, commodity price risk and credit risk arises in the normal course
of the Group’s business. The Group’s overall financial risk management strategy is to seek to ensure that the Group is able to
fund its corporate objectives and meet its obligations to stakeholders. Derivative financial instruments may be used to hedge
exposure to fluctuations, especially shifts in foreign exchange rates.
Financial risk management is carried out by Group Treasury while risk management activities in respect to customer credit
risk are carried out by the Group Credit team. Both Group Treasury and the Credit team operate under policies approved by
the Board. Group Treasury and the Credit team identify, evaluate and monitor the financial risks in close co-operation with the
Group’s operating units.
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(a) Foreign exchange risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign
exchange rates. The Group is exposed to movements in foreign exchange rates in the normal course of its business primarily due
to the fact that it purchases product and crude in United States Dollar (USD) and sells in Australian Dollar (AUD). Any specific
foreign exchange exposure that relates to term loans is managed separately and subject to separate Board approvals.
The objective of the Group’s foreign exchange program is to minimise the effect of a fluctuation in foreign exchange rates on
Group earnings and its cash flows. Transactions which could be regarded as speculative are not permitted. The program of foreign
exchange risk management identifies, measures, takes actions to mitigate this risk, and reports out the performance of the program,
in a controlled and non-speculative manner. The focus is on cash flow exposures rather than just profit and loss.
The Group manages foreign currency risk by using foreign currency forward contracts to offset foreign exchange exposures.
At 31 December 2018 and 2017, the Group hedged 100% of its net USD payables and this is actively managed on a daily basis
through a hedge program. As at 31 December 2018, the total fair value of all outstanding foreign currency exchange forwards
amounted to a $14.6 million loss (2017: $9.3 million loss).
The Group’s exposure to foreign exchange rates for classes of financial assets and liabilities including sensitivities to pre-tax profit of the
Group if the AUD strengthened/weakened by 10% against the USD with all other variables held constant, are set out below. The
foreign exchange program outlined is undertaken to mitigate this risk.
USD denominated trade receivables (in AUD)
USD denominated trade payables (in AUD)
Net exposure
Effect in pre-tax profit
AUD strengthens against USD by 10%
AUD weakens against USD by 10%
2018
$M
234.0
2017
$M
186.8
(1,302.5)
(1,003.9)
(1,068.5)
(817.1)
106.8
(106.8)
81.7
(81.7)
The Group has minimal exposure to other currencies (Euro, British Pound, New Zealand Dollar and Singapore Dollar) with total
payable balances denominated in other currencies of $1.4 million at 31 December 2018 (2017: $1.6 million).
(b) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s syndicated
bank loan with floating interest rates.
The Group’s exposure to interest rate risk for classes of financial assets and liabilities including sensitivities to pre-tax profit of the
Group if interest rates had changed by -/+1% from the year end rates, with all other variables held constant, are set out as follows:
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Financial assets
Cash and cash equivalents
Loan to related party (long term)
Total financial assets
Financial liabilities
Short-term bank loans
Long-term bank loans
Total financial liabilities
Net exposure
Interest rates increase by 1%
Interest rates decrease by 1%
91
2018
$M
108.6
8.5
117.1
–
108.4
108.4
8.7
0.1
(0.1)
2017
$M
164.7
5.0
169.7
239.3
–
239.3
(69.6)
(0.7)
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Notes to the consolidated financial statements continued
24. Financial risk management continued
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
Due to the dynamic nature of the underlying business, the liquidity risk policy requires maintaining sufficient cash and an adequate
amount of committed credit facilities to be held above the forecast requirements of the business.
The Group manages liquidity risk centrally by monitoring cash flow forecasts, maintaining adequate cash on hand and debt facilities.
The debt portfolio is periodically reviewed to ensure there is funding flexibility across an appropriate maturity profile.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:
31 December 2018
Trade and other payables
Short-term bank loans
Long-term bank loans
Derivative liabilities
Finance lease liability
Total at 31 December 2018
31 December 2017
Trade and other payables
Short-term bank loans
Derivative liabilities
Finance lease liability
Total at 31 December 2017
More than
1 year
but no
more than
5 years
$M
More than
5 years
$M
–
–
110.0
–
33.5
143.5
–
–
–
32.7
32.7
–
–
–
–
102.7
102.7
–
–
–
111.3
111.3
No more
than 1 year
$M
1,922.8
–
–
0.9
7.9
1,931.6
1,586.0
240.0
9.3
7.7
1,843.0
Total
$M
1,922.8
–
110.0
0.9
144.1
2,177.8
1,586.0
240.0
9.3
151.7
1,987.0
The financial liabilities due within the next 12-month period amount to $1,931.6 million. The Group has current assets of $2,427.6 million,
a net current asset position of $373.5 million and is in a position to meet its financial liability obligations as and when they fall due.
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(d) Commodity price risk
The Group is exposed to the effect of changes in commodity price (i.e. oil and refined product prices) in its normal course of business.
The objective of the Group’s commodity price strategy is to reduce earnings volatility as a result of movements in oil and refined
product prices. The Group achieves this by:
• monitoring hydrocarbon volumes priced in and out on a monthly basis and hedging up to 100% of the net exposure; and
• monitoring expected refining margins and hedging constituent components to protect refining income, hedging up to 100%
of net refinery exposure.
The Group manages commodity price exposure through the purchase or sale of swaps contracts up to 36 months forward.
No commodity price hedges were outstanding at 31 December 2018 and 2017.
Commodity price sensitivity analysis
The Group’s exposure to commodity prices risk including sensitivities to pre-tax profit if commodity prices had changed by -/+10%
from the year end prices, with all other variables held constant, are set out as follows:
Commodity prices decrease by 10%
Commodity prices increase by 10%
2018
$M
3.9
(3.9)
2017
$M
2.6
(2.6)
(e) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to
a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing
activities, including deposits with banks and financial institutions and other financial instruments.
Customer credit risk
The Group manages credit risk and the losses which could arise from default by ensuring that parties to contractual arrangements
are of an appropriate credit rating, or do not show a history of defaults.
All receivables are monitored by the Group Credit team. If any amounts owing are overdue, these are followed up. The Group
applies the AASB 9 simplified approach to measuring trade receivable expected credit losses, which uses a lifetime expected
loss allowance for expected credit losses for all trade receivables. To measure the expected credit losses, trade receivables
have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the
payment profiles of sales over past periods using historical data and also using forward looking projections of customer payment
expectations. Trade receivables are often insured for events of non-payment, through third party insurance, which has also been
factored into the expected loss rate calculations. Generally, trade receivables are written-off if past due for more than one year
and are not subject to enforcement activity.
The aging profile of the receivable balance and expected credit loss rates are detailed in Note 8 Trade and other receivables.
Financial institution credit risk
Financial assets such as cash at bank and forward contracts are held with high credit quality financial institutions.
Maximum exposure to credit risk
The Group’s maximum credit risk exposure at balance date in relation to each class of recognised financial assets, other than
equity and derivative financial instruments, is the carrying amount of those assets as indicated in the consolidated statement
of financial position.
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Notes to the consolidated financial statements continued
Taxation
25. Income tax and deferred tax
(a) Reconciliation of income tax expense at Australian standard tax rate
to actual income tax expense
Accounting profit before income tax expense
Tax at the Australian tax rate of 30%
Non-deductible transaction costs
Research and development expenditure
Election to form tax consolidated group
Sundry items
Adjustment relating to prior periods
Non-refundable carry forward tax offsets
Income tax benefit/(expense) for the period
(b) Income tax expense
Current tax expense
Deferred tax (expense)/benefit
Adjustment relating to prior periods
Income tax benefit/(expense) reported in the consolidated statement of profit or loss
Deferred income tax benefit/(expense) included in income tax benefit/(expense) comprises:
Increase/(decrease) in deferred tax assets
Decrease/(increase) in deferred tax liabilities
Adjustment in deferred tax relating to prior periods
Tax relating to items recognised in other comprehensive income or directly
in equity rather than through the statement of profit or loss
Deferred tax related to items recognised in other comprehensive income during the period:
Remeasurement of defined benefit obligations
Unrealised losses on cash flow hedges recognised by Viva Energy REIT
Deferred tax related to items recognised directly to equity during the period:
Reserve arising from IPO
2018
$M
2017
$M
307.7
(92.3)
(0.9)
(0.4)
345.5
0.5
18.9
0.6
451.2
(135.4)
(4.3)
(1.8)
–
(4.6)
(18.1)
2.7
271.9
(161.5)
(78.4)
331.4
18.9
271.9
126.8
204.6
12.9
344.3
(176.8)
33.4
(18.1)
(161.5)
23.9
9.5
(24.9)
8.5
(0.6)
1.4
(0.1)
0.8
17.6
–
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Deferred tax assets
The balance comprises combined temporary differences attributable to:
Property, plant and equipment
Inventories
Asset retirement obligation
Employee benefits
Other
Total deferred tax assets
Deferred tax liabilities
The balance comprises combined temporary differences attributable to:
Property, plant and equipment
Intangible assets
Derivative contracts
Financial assets and investments
Total deferred tax liabilities
Net deferred tax assets/(liabilities)
Net deferred tax balances expected to be realised within 12 months
Net deferred tax balances expected to be realised after more than 12 months
2018
$M
2017
$M
128.9
66.6
27.0
20.3
43.9
–
64.0
28.3
17.7
32.9
286.7
142.9
–
(50.0)
(2.5)
(97.6)
(150.1)
(142.2)
(51.8)
(10.1)
(164.9)
(369.0)
136.6
(226.1)
30.8
105.8
136.6
(2.3)
(223.8)
(226.1)
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Property,
plant and
equipment
$M
Asset
retirement
obligations
$M
Employee
benefits
$M
Inventories
$M
Other
$M
Total
$M
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(d) Movements in deferred tax assets
2017 movements
Opening balance at 1 January 2017
(Charged)/credited:
To profit or loss
Acquired in business combination
Closing balance at 31 December 2017
2018 movements
Opening balance at 1 January 2018
(Charged)/credited:
To profit or loss
Directly to equity
Other comprehensive income
–
–
–
–
–
53.0
28.1
17.5
18.2
116.8
11.0
–
64.0
(1.2)
1.4
28.3
(0.6)
0.8
17.7
14.7
–
32.9
23.9
2.2
142.9
64.0
28.3
17.7
32.9
142.9
128.9
–
–
2.6
–
–
(1.3)
–
–
3.2
–
(0.6)
20.3
(6.6)
17.6
–
43.9
126.8
17.6
(0.6)
286.7
Closing balance at 31 December 2018
128.9
66.6
27.0
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Notes to the consolidated financial statements continued
25. Income tax and deferred tax continued
Property,
plant and
equipment
$M
Intangible
assets
$M
Derivative
contracts
$M
Financial
assets and
investments
$M
Total
$M
(e) Movements in deferred tax liabilities
2017 movements
Opening balance at 1 January 2017
(124.1)
(3.4)
(6.4)
(214.0)
(347.9)
(Charged)/credited:
To profit and loss
Acquired in business combination
Other comprehensive income
Closing balance at 31 December 2017
2018 movements
(10.2)
(7.9)
–
(142.2)
3.5
(51.9)
–
(51.8)
(3.0)
–
(0.7)
(5.7)
54.8
–
(15.4)
(5.0)
(0.7)
(10.1)
(164.9)
(369.0)
Opening balance at 1 January 2018
(142.2)
(51.8)
(10.1)
(164.9)
(369.0)
(Charged)/credited:
To profit and loss
Other comprehensive income
Closing balance at 31 December 2018
142.2
–
–
1.8
–
(50.0)
7.6
–
(2.5)
65.9
1.4
(97.6)
217.5
1.4
(150.1)
The income tax expense for the year is the tax payable on the current year’s taxable income based on the income tax rate adjusted
by changes in deferred tax assets and liabilities attributable to temporary differences and unrecognised deferred tax assets,
or liabilities such as unused tax losses.
Current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting
period. Management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject
to interpretation.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements. Deferred income tax is not accounted for if it arises from initial recognition of
goodwill, or of an asset or liability in a transaction, other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit (or loss). Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset
is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Tax assets and liabilities are offset when there is a legally enforceable right to offset.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Tax consolidation
The Company and its wholly-owned Australian controlled entities have elected to form an income tax consolidated group (TCG).
In addition to its own current and deferred tax amounts, the Company also recognises the current income tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the TCG.
The entities in the TCG have entered into a tax funding agreement under which the wholly-owned entities fully compensate the
Company for any current income tax payable assumed and are compensated by the Company for any current income tax receivable
and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to the Company under the income
tax consolidation legislation.
The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements.
Assets or liabilities arising under tax funding agreements with the entities in the TCG are recognised as current amounts receivable
from or payable to other entities in the Group.
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Tax resetting process on formation of tax consolidated group (TCG)
The effect of the election to form a TCG is that the tax base of assets held by the Company and its subsidiaries was reset at values
closer to current market value based on the Initial Public Offer valuation.
As an outcome of the reset, a total tax benefit of $345.5 million arose, resulting in the net deferred tax liability existing at
31 December 2017 being replaced by a net deferred tax asset in 2018. The key deferred tax benefits arising from the election
to form a TCG are reflected in Property, plant and equipment, Financial assets (through a reset of the investment in Viva Energy
REIT) and Other (reflecting future tax deductions for transaction costs associated with the IPO).
Group structure
26. Group information
(a) Principles of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2018.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee.
(b) Controlled entities
The consolidated financial statements of the Group include the controlled entities listed below:
Name of entity
Viva Energy Holding Pty Limited
Viva Energy Australia Group Pty Limited
Viva Energy Australia Pty Limited
Viva Energy Aviation Pty Limited
Viva Energy Gas Pty Limited
Viva Energy Refining Pty Limited
VER Manager Pty Limited
ZIP Airport Services Pty Ltd
Viva Energy S.G. Pte Ltd
Country of incorporation/establishment
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
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Equity
holding
2018
%
Equity
holding
2017
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
Viva Energy S.G. Pte Ltd was incorporated on 19 June 2018 as an indirect wholly-owned entity of the Group.
(c) Interests in associates
The Group holds interest in the following investments accounted for using the equity method:
Name of entity
Liberty Oil Holdings Pty Limited
Viva Energy REIT
Westside Petroleum Pty Limited
Country of incorporation/establishment
Australia
Australia
Australia
Equity
holding
31 Dec 2018
%
Equity
holding
31 Dec 2017
%
50
38
50
50
38
–
Further details regarding these investments can be found in Note 28 Interests in associates and joint operations.
(d) Interests in joint operations
The Group has a 52% interest in W.A.G Pipeline Pty Ltd (2017: 52%), a 50% interest in Crib Point Terminal Pty Ltd (2017: 50%) and a
33% interest in Cairns Airport Refuelling Services Pty Ltd. These are classified as joint operations under AASB 11 Joint Arrangements.
Further details regarding these investments can be found in Note 28 Interests in associates and joint operations.
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Notes to the consolidated financial statements continued
27. Business combinations
(a) Acquisitions in 2018
There were no acquisitions in 2018 that are within the scope of AASB 3 Business Combinations. The pre-IPO restructure disclosed
on page 64 has been treated as a common control transaction and is outside the scope of AASB 3.
(b) Acquisitions in 2017
On 31 May 2017, the Group acquired 100% of the voting shares and operations of Shell Aviation Australia Pty Ltd (Shell Aviation),
an entity based in Australia and part of the Shell Group of companies for consideration of $651.9 million plus incidental acquisition
costs. The total purchase consideration was paid as follows:
Offset loan receivable and financial assets associated with Shell Aviation
Offset trade receivables from Shell Aviation
Cash settlement*
Consideration paid
Purchase
consideration
$M
154.7
165.0
332.2
651.9
Shell Aviation specialised in the distribution and supply of aviation fuels to airports around Australia. The Group acquired Shell
Aviation as its operations align with the Viva Energy Group core operations and provides additional channels and infrastructure
to support the sale of the Group’s aviation fuel products.
The acquisition had the following effect on the Group’s assets and liabilities:
Cash and cash equivalents*
Trade and other receivables
Property, plant and equipment
Intangible assets
Inventories
Other assets
Trade payables
Provisions
Net deferred tax liabilities
Net identifiable assets and liabilities at fair value
Goodwill on acquisition
Consideration paid
Recognised
values
$M
73.2
137.7
113.2
173.0
17.6
0.5
(5.1)
(14.0)
(57.5)
438.6
213.3
651.9
* The cash flow statement on page 63 shows the net cash consideration of $259.0 million.
The recognised values represent the fair value of assets recorded on acquisition.
Intangible assets acquired of $173.0 million represented the amount paid to Shell Aviation for customer contracts and joint venture
rights, which meet the criteria for recognition as a separately identifiable intangible asset at the date of acquisition. These intangible
assets are to be amortised over their expected life. Refer to Note 14 Goodwill and other intangible assets for further details.
Goodwill acquired of $213.3 million in 2017 represented other intangible assets that did not meet the criteria for recognition as
separately identifiable assets at the date of acquisition. During 2018 there was an adjustment to the purchase price allocation
of the Shell Aviation acquisition and a further $9.8 million in goodwill was recognised in line with AASB 3 guidance. None of
the goodwill recognised is expected to be deductible for tax purposes. The consideration of the carrying value of goodwill
is considered in Note 14 Goodwill and other intangible assets.
There were no other material business combinations during the year ended 31 December 2017.
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28. Interests in associates and joint operations
(a) Associates
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is not in control or joint control over those policies. The Group
has a non-controlling interest in the following entities, which are classified as associates under the current ownership structure
in accordance with AASB 128 Investments in Associates and Joint Ventures. These investments have been recognised in the
consolidated financial statements using the equity method:
Liberty Oil Holdings Pty Limited
Viva Energy REIT
Westside Petroleum Pty Limited
Total investments accounted for using the equity method
31 Dec 2018
$M
31 Dec 2017
$M
58.4
591.6
14.9
664.9
58.4
570.2
–
628.6
Liberty Oil Holdings Pty Limited
Liberty Oil Holdings Pty Limited (Liberty) is a private entity that is based in Melbourne, Australia. The Group holds 50% (2017: 50%)
equity holding in Liberty.
Liberty had no other contingent liabilities or capital commitments as at 31 December 2018 and 2017, except as disclosed
in Note 16 Commitments and contingencies.
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Movement of Liberty Oil Holdings investment
Balance at the beginning of the year
Dividends received
Share of Liberty Oil Holdings profit
Share of Liberty Oil Holdings OCI
31 Dec 2018
$M
31 Dec 2017
$M
58.4
–
–
–
58.4
58.2
–
0.2
–
58.4
Viva Energy REIT
Viva Energy REIT is an ASX listed real estate investment trust that owns a portfolio of service stations leased to Viva Energy
Australia Pty Limited, a wholly-owned, consolidated subsidiary of the Group. As at 31 December 2018, the Group held a 38%
interest (2017: 38%) in Viva Energy REIT and is represented by two of five Board members. The 276,060,625 shares owned in Viva
Energy REIT had a fair value of $621.1 million (2017: $623.9 million) as at 31 December 2018 based on the ASX quoted share price.
Movement of Viva Energy REIT investment
Balance at the beginning of the year
Dividends received
Share of Viva Energy REIT profit
Share of Viva Energy REIT OCI
31 Dec 2018
$M
31 Dec 2017
$M
570.2
(37.5)
63.5
(4.6)
591.6
535.5
(32.8)
65.2
2.3
570.2
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Notes to the consolidated financial statements continued
28. Interests in associates and joint operations continued
(a) Associates continued
Westside Petroleum Pty Limited
In May 2018, the Group agreed to acquire a 50% non-controlling interest in Westside Petroleum Pty Ltd (Westside), an independently
owned and operated retail fuels business with more than 50 retail sites across New South Wales, Victoria and Queensland.
The transaction was finalised in August 2018 after ACCC and FIRB approval, for a settlement purchase price of $14.9 million plus an
earn-out that is contingent to achieving an EBITDA target in 2019.
Movement of Westside Petroleum investment
Balance at the beginning of the year
Acquisition
Dividends received
Share of Westside Petroleum profit/(loss)
Share of Westside Petroleum OCI
31 Dec 2018
$M
–
14.9
–
–
–
14.9
Total share of profits in associates for the 2018 year amounted to $63.5 million (2017: $65.4 million).
Included within the capital commitments disclosed in Note 16 Commitments and contingencies is $9.6 million (2017: $9.2 million)
in commitments which represents the Group’s share of capital contracts entered into by associate companies totalling $22.3 million
for retail outlets, an investment property and capital improvements. Viva Energy REIT had no other contingent liabilities or capital
commitments as at 31 December 2018 and 2017, except as disclosed in Note 16 Commitments and contingencies.
Aggregate summary information of associates
This summarised financial information represents the aggregate summary information of associates with the majority relating to
Viva Energy REIT. It represents the amounts shown in financial statements of the associate companies in accordance with Australian
Accounting Standards.
2018
$M
145.6
2017*
$M
139.0
2,561.1
2,343.1
(194.2)
(905.6)
(109.6)
(763.1)
1,606.9
1,609.4
612.7
52.2
664.9
614.6
14.0
628.6
1,926.0
1,513.8
167.1
(12.2)
154.9
37.5
172.3
(7.0)
165.3
32.8
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net asset/(liabilities)
Net assets/(liabilities) – Group share based on percentage of investment
Adjustments resulting from the equity accounting method
Carrying amount of investments accounted for using the equity method
Revenue
Net profit from continuing operations
Other comprehensive income
Total comprehensive income
Distributions received from equity accounted for investments
* 2017 does not include Westside Petroleum Pty Limited.
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(b) Joint operations
Joint operations are those entities whose financial and operating policies the Group has joint control over, and where the Group
has rights to the assets and obligations for the liabilities of the entity.
The Group owns a 52% interest in W.A.G Pipeline Pty Ltd, a 50% interest in Crib Point Terminal Pty Ltd and a 33% interest in Cairns
Airport Refuelling Services Pty Ltd. The investments are incorporated in Australia with principal operations in Victoria and Cairns,
and are classified as joint operations under AASB 11 Joint Arrangements, where the Group recognises its direct right to the jointly
held assets, liabilities, revenues and expenses and has proportionately consolidated its interests under the appropriate headings
in the consolidated financial statements.
The joint operations had no other contingent liabilities or capital commitments as at 31 December 2018 and 2017, except as disclosed
in Note 16 Commitments and contingencies.
29. Parent company financial information
The financial information presented below presents that of the parent entity of the Group, Viva Energy Group Limited. No 2017
comparative information was presented as the parent entity was newly formed on 13 July 2018 as part of the initial public offering.
Refer to the pre-IPO restructure disclosed on page 64 for further details.
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Contributed equity
IPO reserve
Total equity
Results
Profit of the Company
Total comprehensive income of the Company
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$M
17.8
4,782.9
4,800.7
5.0
–
5.0
4,861.3
(67.8)
4,793.5
2.2
2.2
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Notes to the consolidated financial statements continued
30. Deed of Cross Guarantee
The Company and all the controlled entities listed in Note 26(b) Group information (with the exception of Viva Energy S.G. Pte Ltd)
are parties to a Deed of Cross Guarantee (Deed) as at 31 December 2018. Under the Deed, each company guarantees the debts
of the others to each creditor payment in full of any debt in accordance with the terms of the Deed. The Deed of Cross Guarantee
was introduced on 14 December 2018 with Viva Energy Group Limited as the Holding Entity of the Group. The Deed replaced
previous commensurate arrangements pursuant to which Viva Energy Holding Pty Limited was the Holding Entity.
By entering into the Deed, the controlled entities have been relieved from the requirement to prepare a financial report and
directors’ report under Instrument 2016/785 issued by the Australian Securities and Investments Commission (Instrument).
The companies referred to above represent a ‘Closed Group’ for the purposes of the Instrument.
The aggregate assets and liabilities of the companies which are party to the Deed and the aggregate of their results for the period
to 31 December 2018 and 2017 are set out below:
Revenue
Replacement cost of goods sold
Inventory gain/(loss)
Sales duties and taxes
Transportation expenses
Historical cost of goods sold
Gross profit
Net gain on disposal of property, plant and equipment
Other income
Transportation expenses
Salaries and wages
General and administration expenses
Maintenance expenses
Operating leases
Sales and marketing expenses
Impairment
Results from operations
Interest income
Share of profit in associates
Realised/unrealised (loss)/gain on derivatives
Net foreign exchanges gain/(loss)
Movement in financial assets
Depreciation and amortisation expenses
Finance costs
Profit before income tax expense
Income tax benefit/(expense)
Profit after tax
102
2018
$M
2017
$M
16,394.4
13,905.4
(10,328.6)
(7,769.4)
(93.6)
(8.7)
(4,135.3)
(4,123.6)
(286.0)
(256.4)
(14,843.5)
(12,158.1)
1,550.9
1,747.3
10.2
10.2
(283.4)
(249.1)
(140.3)
(98.1)
(286.3)
(114.2)
(1.4)
388.3
2.7
63.5
39.7
(29.8)
–
(129.6)
(41.7)
293.1
276.8
569.9
15.6
15.6
(316.1)
(242.1)
(191.2)
(99.4)
(269.0)
(106.1)
(0.5)
538.5
3.6
65.4
(41.1)
17.7
4.8
(107.1)
(31.3)
450.5
(161.3)
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ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets classified as held for sale
Derivative assets
Prepayments
Current tax assets
Non-current assets
Long-term receivables
Property, plant and equipment
Intangible assets, including goodwill
Post-employment benefits
Investments accounted for using the equity method
Net deferred tax assets
Other non-current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Provisions
Short-term borrowings
Derivative liabilities
Current tax liabilities
Non-current liabilities
Provisions
Long-term borrowings
Net deferred tax liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
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$M
2017
$M
107.2
1,141.4
1,010.9
4.1
15.5
71.0
83.2
164.4
1,162.7
964.8
9.7
–
62.2
–
2,433.3
2,363.8
19.7
13.9
1,463.8
1,395.3
432.5
11.4
664.9
136.5
1.5
384.7
15.3
628.6
–
0.8
2,730.3
5,163.6
2,438.6
4,802.4
1,941.1
1,586.6
123.2
7.2
0.9
–
152.1
246.4
9.3
139.0
2,072.4
2,133.4
174.1
152.0
–
326.1
169.2
43.5
226.1
438.8
2,398.5
2,572.2
2,765.1
2,230.2
4,857.1
(4,226.5)
2,134.5
2,765.1
641.0
11.5
1,577.7
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018Directors’ reportConsolidated financial statementsNotes to the consolidated financial statementsAuditor’s independence declarationDirectors’ declarationIndependent auditor’s reportDisclosuresAdditional informationCorporate directory
Notes to the consolidated financial statements continued
Other disclosures
31. Post-employment benefits
(a) Superannuation plan
The main provider of superannuation benefits in the Group is the Viva Energy Superannuation Fund (VESF). This fund was
established on 1 August 2014, and provides a mixture of defined benefits and accumulation style benefits. Currently, the principal
type of benefits provided under the VESF (to eligible members) is a lump sum, pension or lump sum and accumulation benefits.
Lump sum and pension benefits are based primarily on years of service and the highest average salary of the employee.
The Viva Energy Superannuation Plan (Plan) is a sub-plan in the Plum Division of the MLC Super Fund, which is operated by NULIS
Nominee (Australia) Limited (the Trustee). The Plan is a ‘regulated fund’ under the provision of the Superannuation Industry
(Supervision) Act 1993. The Plan is treated as a complying defined benefit superannuation fund for taxation purposes.
The Group’s superannuation plan has a defined benefit section and also a defined contribution section. The defined contribution
section receives fixed contributions from Group companies and the Group’s legal or constructive obligation is limited to these
contributions. The defined benefit section was closed to new members in 1998.
(b) Defined benefit superannuation – significant estimate
The liability or asset recognised in the consolidated statement of financial position in respect of defined benefit superannuation
section is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.
An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include
the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities
involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions.
All assumptions are reviewed at each reporting date.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using
market yields of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms
approximating to the terms of the related obligation.
Gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which
they occur, directly in other comprehensive income. They are included in retained earnings in the consolidated statement of changes
in equity and recognised as remeasurement of retirement benefit obligations in the consolidated statement of financial position.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised
immediately in the consolidated statement of profit or loss within salaries and wages as past service costs.
Contributions to the defined contribution section of the Group’s superannuation fund and other independent defined contribution
superannuation funds are recognised as an expense as they become payable.
The following sets out details in respect of the defined benefit section only.
Amounts recognised in consolidated statement of financial position
Present value of defined benefit obligation
Fair value of defined benefit plan assets
Net defined benefit asset recognised in the consolidated statement of financial position
2018
$M
(111.4)
122.8
11.4
2017
$M
(123.1)
138.4
15.3
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Present value of defined
benefit obligation
2018
$M
2017
$M
(123.1)
(124.2)
(5.0)
(3.8)
–
(1.7)
(0.6)
2.5
–
21.1
–
(0.8)
–
(5.1)
(4.1)
–
–
(3.9)
0.6
–
20.6
–
(0.6)
(6.4)
Fair value of defined
benefit plan assets
2018
$M
138.4
–
4.2
(2.2)
–
–
–
–
2017
$M
140.6
–
4.6
3.0
–
–
–
–
(21.1)
(20.6)
2.7
0.8
–
3.8
0.6
6.4
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(111.4)
(123.1)
122.8
138.4
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$M
2017
$M
4.5
(0.5)
1.0
5.0
(0.4)
4.6
2.2
1.7
0.6
(2.5)
(0.6)
1.4
4.8
(0.6)
0.9
5.1
(0.5)
4.6
(3.1)
–
3.9
(0.6)
(0.1)
0.1
Changes in the defined benefit obligation and fair value of plan assets
Balance at 1 January
Current service cost
Net interest on the defined benefit (liability)/asset
Return on assets less interest income
Actuarial gain/(loss) – change in demographic assumptions
Actuarial gain/(loss) – change in financial assumptions
Actuarial gain/(loss) – experience adjustments
Tax on remeasurement of defined benefit obligation
Benefits paid
Employer contributions
Employee contributions
Business acquisition
Balance at 31 December
Amounts recognised in consolidated statement of profit or loss
Amounts recognised in profit or loss
Service cost
Member contributions
Plan expenses
Current service cost
Net interest on the new defined benefit liability/(asset)
Components of defined benefit cost recorded in profit or loss
Amounts recognised in other comprehensive income
Remeasurement of the net defined benefit liability:
Return on assets less interest income
Actuarial (gain)/loss – change in demographic assumptions
Actuarial (gain)/loss – change in financial assumptions
Actuarial (gain)/loss – experience adjustments
Tax on remeasurement of defined benefit obligation
Components of defined benefit cost recorded in other comprehensive income
105
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Notes to the consolidated financial statements continued
31. Post-employment benefits continued
(b) Defined benefit superannuation – significant estimate continued
Amounts recognised in consolidated statement of profit or loss continued
The major categories of plan assets of the fair value of the total plan assets are as follows:
Australian equities
International equities
Property
Fixed income bonds
Other
Cash
Total plan assets
2018
$M
11.6
16.8
10.3
51.2
12.9
20.0
2017
$M
13.0
19.0
11.6
57.7
14.5
22.6
122.8
138.4
The Group has agreed to pay contributions to the Plan of 8.8% (2017: 18.5%). The following payments are expected to be contributed
to the defined benefit plan in future years:
Within the next 12 months
Between 2 and 5 years
Between 5 and 10 years
Beyond 10 years
Total expected payments
2018
$M
1.6
4.1
2.1
0.6
8.4
2017
$M
3.8
10.3
5.4
1.8
21.3
The average duration of the defined benefit plan obligation at the end of the reporting period is five years (2017: five years).
Actuarial assumptions
The principal assumptions used in determining benefit obligations for the Group’s Plan are shown below:
Discount rate
Expected rate of salary increases
Pension increase rate
2018
%
3.1
2.5
2.1
2017
%
3.2
2.5
2.1
Pensioner mortality has been assumed following the mortality under the Australian Life Tables 2010–12.
Significant assumptions used to determine the present value of the defined benefit obligation are the discount rate and expected
salary increases. The sensitivity analysis shown below has been based on reasonable possible changes of the assumptions occurring
at the end of the reporting period:
Discount rate:
1.0% increase
1.0% decrease
Expected rate of salary increases:
1.0% increase
1.0% decrease
Impact on defined
benefit obligation
2018
$M
2017
$M
(6.1)
6.9
4.4
(4.1)
(6.8)
7.7
5.2
(4.9)
The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit
obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity analyses
are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analyses may not be
representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in
isolation of one another.
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32. Related party disclosures
Note 26 Group information provides information about the Group’s structure, including details of the subsidiaries and the
parent entities.
Entities in the Group engage in a variety of related party transactions as part of the normal course of business. They supply products to
related entities and overseas related corporations outside of the Group, and purchase crude and products from and pay service fees
to overseas related corporations.
• All related party transactions are conducted at arm’s length on a commercial basis.
• Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash.
• For the year ended 31 December 2018, the Group has not recorded any impairment of receivables relating to amounts owed by
related parties, nor has there been any expenses recognised during the period in respect of bad or doubtful debts written off from
related parties (2017: nil).
• The assessment of related party receivables is undertaken on an ongoing basis each financial year through examining the
financial position of the related party and the market in which the related party operates.
The following table provides the total amount of transactions that have been entered into with related parties for the relevant
financial year.
(a) Transactions with related parties
Sales and purchases of goods and services
Purchases
Sales of goods and services
Sales of assets
Other transactions
Dividends paid to parent*
Return of capital*
Outstanding balances arising from sales/purchases of goods and services
Receivables
Payables
2018
$’000
2017
$’000
10,598,718
8,087,016
604,685
58,581
17,818
–
13,474
45,108
82,117
252,829
–
–
1,290,261
988,967
* Represents a 2018 non-cash dividend and capital return settled through the sale of assets of $58.6 million to the immediate parent prior to the IPO.
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(b) Transactions with associates
Sales and purchases of goods and services
Purchases
Sales of goods and services
Other transactions
Interest income from associates
Sales of assets to associates
Lease expense paid to associates
Dividends from associates
Loan to associates
Outstanding balances arising from sales/purchases of goods and services
Receivables
Payables
107
2018
$’000
2017
$’000
30,961
18,842
1,440,714
1,139,186
252
420
102
–
135,389
128,351
37,517
8,500
87,924
12,829
32,796
5,000
69,794
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Notes to the consolidated financial statements continued
32. Related party disclosures continued
(c) Transactions with Key Management Personnel or entities related to them
Executive Directors of controlled entities are entitled to receive discounts on their purchases of Company products under the
same conditions as are available to all other employees of the Group. The terms and conditions of the transactions with Directors
or their Director-related entities were no more favourable than those available, or which might reasonably be expected to be
available, on similar transactions to non-Director related entities or on an arm’s length basis. Dealings between the Group and
various related companies are identified in this note.
Some directors hold directorships within the Vitol group of companies and any transactions entered into by the Company with
the Vitol group of companies are in the ordinary course of business and are at arm’s length.
(d) Key Management Personnel compensation
Short-term employee benefits
Post employee benefits
Employee Option Plan
Total compensation paid to key management personnel
2018
$’000
1,368
74
5,608
7,050
2017
$’000
5,931
255
237
6,423
(e) Employee Option Plan
The establishment of an Employee Option Plan for the Group’s executive staff was approved by shareholders during 2016. The
Employee Option Plan is designed to provide long-term incentives for selected executive staff to deliver long-term earnings for
the Group. Under the plan, participants are granted options which only vest if certain performance standards are met. Participation
in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any
guaranteed benefits.
In connection with the IPO, the following changes have been made to the Employee Option Plan:
• The Group acquired all of the options in VEH from the participants in the Legacy Long Term Incentive Plan (LTIP) in return
for options over ordinary shares in the Group.
• Immediately following the ASX listing, a portion of the options were cancelled for a cash payment ,which was, in part, immediately
applied to satisfy the exercise price in respect of all remaining vested options.
• After listing, executive management hold shares in the Group as well as a total of 16,534,520 new share options to replace
the legacy options that had not yet vested. The remaining vesting periods are consistent with the legacy share option plan.
• In addition to this, a new Short Term Incentive Plan (STIP) and LTIP were put in place for 2018 including both cash and Performance
Rights for executive management.
The total granted options over unissued preference shares outstanding as at 31 December 2018 is 16,534,520 (2017: 16,186,468) with
a weighted average exercise price per share option of A$0.94 (2017: USD$1.64). During the period 1,600,000 Performance Rights
were granted, 5,341,533 options were exercised and 3,884,749 options were cancelled. No options or Performance Rights have been
granted to Directors or any of the five highest remunerated officers since the end of the financial year.
Grant date
26 April 2016
26 April 2016
25 October 2017
Total
Expiry date
1 January 2020
1 January 2020
1 January 2022
Exercise
price
($AUD)
0.82
1.51
1.21
Number of options
31 December
2018
31 December
2017
13,073,808
13,758,498
1,922,618
1,538,094
1,618,647
809,323
16,534,520
16,186,468
Weighted average remaining contractual life of options outstanding at end of period
1.2 years
2.1 years
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Grant date
23 July 2018
23 July 2018
23 July 2018
Fair value
at grant
date
($AUD)
$1.39
$2.27
$2.27
Number of performance
rights allocated
31 December
2018
31 December
2017
800,000
400,000
400,000
–
–
–
The assessed fair value of the share options at grant date is determined using an adjusted form of the Black Scholes Model
and the Chaffe put option model, that takes into account exercise price, the term of the option, business valuation at grant date,
volatility rate of 40% and risk free rate in the range of 1%-1.5% and the impact of control/marketability variants were used in the
calculation of the fair value of the options.
The assessed fair value of the Performance Rights at grant date is determined using the Monte Carlo simulation (using the Black
Scholes framework) and takes into account the share price of $2.50, expected volatility of 31% and a dividend yield of 4.1%.
Total expenses arising from Employee Option Plan transactions recognised during the 2018 period was $1,900,000 (2017: $236,893).
33. Auditor’s remuneration
The auditor of the Company and the Group is PricewaterhouseCoopers Australia (PwC). The following fees were paid or payable to
PwC for services provided to the Company and the Group.
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Audit or review services:
Audit or review of financial reports of the Group
Non-audit services:
Other assurance services*
Due diligence services and other services
Total
* Other assurance services in 2018 includes $2,127,824 of IPO related services.
2018
$
2017
$
635,000
530,000
2,197,824
117,276
252,500
280,899
2,950,100
1,063,399
34. Events occurring after the reporting period
Coles Alliance partnership
On 6 February 2019, the Group announced the extension of the Alliance agreement with Coles Express through to 2029 under
revised terms to create greater alignment between both parties and position the agreement for future growth. Under the revised
terms, in March 2019 the Group will assume full responsibility for the provision of the fuel offering, including retail fuel pricing
and marketing across the Alliance network. Coles Express will continue to operate Alliance stores and manage the customer
experience. As a result of the amendments to the Alliance terms and fuel margin forgone by Coles Express, the Group will make
a one-off payment of $137 million in March 2019 to be funded by existing debt facilities.
Bank refinancing
On 26 March 2018, the Group replaced its borrowing facility with a US$700 million syndicated, unsecured revolving credit facility
which has an initial two-year term and a one-year extension option.
At the end of the reporting period, the Group has entered into discussions with its existing lending group and is seeking to
extend its existing US$700 million syndicated, revolving credit facility. This is expected to be completed on terms and conditions
largely consistent with the existing facility.
Restructure of Liberty arrangements
On 27 February 2019, the Group agreed to acquire the remaining 50% interest in Liberty Oil Holding Pty Ltd’s wholesale business,
together with agreeing to establish a new retail joint venture to continue to grow the Liberty Oil retail business, of which it
will own 50%. The consideration payable for the proposed transaction is $42 million, which will be funded out of existing debt
facilities. The transaction remains subject to regulatory approvals.
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Directors’ declaration
This Directors’ declaration is required by the Corporations Act 2001.
The Directors declare that in their opinion:
(a) the consolidated financial statements and notes of the Viva Energy Group for the year ended 31 December 2018 set out
on pages 59 to 109 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards and the Corporations Regulations 2001; and
(ii) giving a true and fair view of the Viva Energy Group’s financial position as at 31 December 2018 and of its performance
for the year ended on that date;
(b) there are reasonable grounds to believe that the Viva Energy Group will be able to pay its debts as and when they become
due and payable; and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in
Note 30 Deed of Cross Guarantee to the financial statements will be able to meet any obligations or liabilities to which they
are, or may become, subject to by virtue of the Deed of Cross Guarantee described in Note 30 Deed of Cross Guarantee
to the financial statements.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive
Officer and Chief Financial Officer for the year ended 31 December 2018.
The declaration is made in accordance with a resolution of the Directors.
Robert Hill
Chairman
27 February 2019
Scott Wyatt
CEO and Director
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Independent auditor’s report
Independent auditor’s report
To the members of Viva Energy Group Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Viva Energy Group Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 31 December 2018 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated statement of financial position as at 31 December 2018
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of profit or loss for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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Independent auditor’s report continued
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Key audit matters
Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
Our audit included
procedures over the Group’s
system migration, including
testing the data migration,
evaluating and testing the
design and operating
effectiveness of certain
automated and IT dependent
controls.
Amongst other relevant topics,
we communicated the
following key audit matters to
the Audit and Risk Committee:
-
-
-
Inventory valuation
Environmental and asset
retirement provisions
Tax resetting process on
formation of Tax
Consolidated Group
These are further described in
the Key audit matters section
of our report.
For the purpose of our audit
we used overall Group
materiality of $15.0 million,
which represents
approximately 5% of the
Group’s profit before tax.
We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the
financial report as a whole.
We chose Group profit before
tax because, in our view, it is
the benchmark against which
the performance of the Group
is most commonly measured.
We utilised a 5% threshold
based on our professional
judgement, noting it is within
the range of commonly
acceptable thresholds.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
Inventory valuation
(Refer to note 5) [$1,011.3m]
Following a system migration in FY18, the Group
transitioned its legacy inventory calculation to J.D.
Edwards (JDE). This introduced an automated
standard costing and purchase price variance (PPV)
function based on replacement cost basis. However,
the month-end process includes management
estimation of inventory based on the first- in- first out
(FIFO) method which is used to comply with
accounting standard requirements.
This was a key audit matter due to the judgement
involved and the significance of the inventory balance.
How our audit addressed the key audit
matter
To assess the valuation of inventory, we performed
the following procedures amongst others:
Tested the mathematical accuracy of the
valuation calculations.
Tested the consistency of key inputs in the
valuation models, including refining margins
and manufacturing costs, by comparing them
to the evidence obtained from other audit
procedures.
Assessed the reasonableness of management
assumptions used to support variances
recognised on the balance sheet.
Compared the carrying value of the inventory
to market price obtained from an external
site (Platts) to assess if inventory is carried at
the lower of cost or net realisable value.
Environmental and asset retirement
provisions
(Refer to note 15) [$131.7m]
We performed the following procedures amongst
others:
As at 31 December 2018, the Group recognised the
following provisions:
- Environmental provision: $41.0m
- Asset retirement provision: $90.7m
These are in relation to the Group’s obligations to
rehabilitate sites, either during or at the end of their
operations. This includes the Group’s conversion of its
former Clyde refinery to a storage terminal.
This was a key audit matter as the calculation of the
provisions required the Group to make judgements in
estimating the cost and timing of future rehabilitation
Tested the mathematical accuracy of the
provision calculations.
Obtained and read the litigation register and
board minutes to identify any legal notices in
relation to environmental obligations and
checked that these were appropriately
considered in the determination of the
provision.
Assessed the competence, experience and
objectivity of the internal and external
experts used to prepare the relevant
calculations for the determination of the
provisions.
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Independent auditor’s report continued
Key audit matter
How our audit addressed the key audit
matter
work. As the costs were discounted to a present value
for the provision, the Group also needed to use
judgement to determine an appropriate discount rate.
Corroborated a sample of estimates used in
the provision calculations to third party
support or estimates made by external
experts.
Evaluated the completeness of the provisions
through comparison of obligations arising
from new sites.
Performed sensitivity analysis over key
estimates and assumptions, such as the
discount and inflation rates, used in the
rehabilitation models by using other
assumptions that we consider reasonably
possible to assess the impact on the asset
retirement provision determined.
Tax resetting process on formation of Tax
Consolidated Group
(Refer to Note 25)
We performed the following procedures, amongst
others:
As part of the Initial Public Offering (IPO), the former
Viva Energy Holding tax consolidated group (TCG)
was deconsolidated and a new multiple entry
consolidated (MEC) group was formed with Viva
Energy Group Limited (VEG) as the new head entity.
The tax base of assets held by the Group were reset at
values closer to current market values based on the
IPO valuation.
As an outcome of the reset, a total tax benefit of
$345.5m arose, resulting in the net deferred tax
liability existing as at 31 December 2017 being
replaced by a net deferred tax asset in 2018.
This was a key audit matter due to the judgement
involved regarding the valuation of the assets and the
magnitude of the tax benefit recognised.
Tested the mathematical accuracy of the
calculations in the tax consolidation
workbooks.
Obtained and read valuation reports from
management’s experts.
Assessed the competence, experience and
objectivity of external experts used to
prepare the relevant valuation reports.
Together with our internal tax experts,
assessed whether the preliminary tax
positions which are subject to review by the
Australian Taxation Office (ATO) as part of
the Group tax return submission in July
2019, are in line with our understanding of
the current Australian tax legislation.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2018, but does not include
the financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the
other information we obtained included the Directors' Report. We expect the remaining other
information to be made available to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
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Independent auditor’s report continued
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 39 to 53 of the directors’ report for the
year ended 31 December 2018.
In our opinion, the remuneration report of Viva Energy Group Limited for the year ended 31 December
2018 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Chris Dodd
Partner
Niamh Hussey
Partner
Melbourne
27 February 2019
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018
Disclosures
On 11 July 2018, the Company was granted certain waivers by ASX from ASX Listing Rule 10.1. Pursuant to the terms of the waivers,
the following disclosures are outlined below.
Summary of material terms of certain supply agreements with affiliates of Vitol
Holding B.V
Members of the Group and affiliates of Vitol Holding B.V. are parties to a number of contractual arrangements, including the
following material contracts:
• Vitol Asia Pte Ltd (Vitol Asia) and Viva Energy SG Pte Ltd are parties to a fuel supply agreement dated 18 June 2018 (Vitol Fuel
Supply Agreement);
• Vitol Aviation BV (Vitol Aviation) and Viva Energy Aviation Pty Ltd (Viva Aviation) are parties to an agreement relating to the supply
of aviation fuel dated 23 April 2018 (Vitol Aviation Fuel Supply Agreement); and
• Vitol Asia and Viva Energy Australia Pty Ltd are parties to a standard-form ISDA Master Agreement dated 13 August 2014
(Hedge Agreement).
Vitol Fuel Supply Agreement
Overview
Under the Vitol Fuel Supply Agreement, Vitol Asia agrees to supply to Viva Energy, and Viva Energy agrees to purchase (and to
ensure that each other member of the VEA Group purchases) from Vitol, the following products:
• all of Viva Energy’s requirements for feedstock for its refining operations, including crude oil and condensate (Feedstock), subject
to certain exceptions; and
• all of the hydrocarbon products (other than Feedstock) required by the VEA Group for its Australian operations, except for
products produced by the VEA Group’s refining operations, products purchased under ‘buy-sell’ agreements with local refiners,
and any lubricant products purchased from Shell Markets (Middle East) Limited under an Agreement for the Sale and Distribution
of Lubricants (Shell Lubricants Agreement), (collectively, Product).
Exclusivity arrangements
Pursuant to the Vitol Fuel Supply Agreement, Viva Energy agrees that it will not (and will ensure that each other member of the
VEA Group does not), except with the prior written consent of Vitol Asia but subject to certain exceptions, acquire Product from
any third party or acquire any interest in a third-party supplier of Product which is inconsistent with Viva Energy’s obligations
under the agreement. Further, Viva Energy agrees that if it or any member of the VEA Group wishes to sell any Products which
are ultimately exported out of Australia, Vitol Asia shall be the sole and exclusive market interface for all such sales on terms
to be mutually agreed.
In addition, if any member of the Group at any time seeks to purchase any lubricants of the kind purchased by Viva Energy under
the Shell Lubricants Agreement other than pursuant to the terms of that agreement, Vitol Asia shall, to the maximum extent
permitted by law, be the exclusive supplier of such lubricants to Viva Energy on terms to be mutually agreed by the parties but
based on the terms of the Vitol Fuel Supply Agreement.
For the purposes of the above paragraphs, VEA Group means the Company and each of its direct and indirect holding companies
and subsidiaries, and subsidiary undertakings and associated companies from time to time of such holding companies.
Term and termination
The initial term of the Vitol Fuel Supply Agreement is 10 years, which Vitol Asia may renew for a further period of five years
and which, following such renewal, the parties may renew again for a further period of five years by mutual agreement.1
The Vitol Fuel Supply Agreement may be terminated in the following circumstances:
• by the non-defaulting party, if the defaulting party becomes insolvent or fails to pay any amount due under the agreement;
• by the non-defaulting party, if Vitol Asia fails to deliver, or Viva Energy fails to take delivery of, for reasons other than ‘Force
Majeure’, at least 75% of the aggregate quantities of Product nominated or agreed for delivery and receipt in a month for six
or more consecutive months;
• by either party giving not less than 12 months’ notice, if Vitol Asia announces that it intends to discontinue its Product trading
business serving Australia; and
• by Vitol Asia, in the event of Viva Energy’s breach of certain of its obligations under the Vitol Fuel Supply Agreement
(including its obligations under the exclusivity arrangements), any event of default or review event under Viva Energy’s
financing arrangements, and certain other termination events.
1. Renewal of the Vitol Fuel Supply Agreement will be subject to shareholder approval, should ASX Listing Rule 10.1 apply at that time.
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Disclosures continued
Pricing terms
Under the Vitol Fuel Supply Agreement, the price for each delivery of Product is, or is determined by reference to, a price mutually
agreed by the parties based on prevailing market conditions, the actual price at which the relevant Vitol entity acquired the Product
or the average price in the relevant index for the Product plus reasonable financing and handling costs and the cost of freight and
logistics, as well as applicable market and quality premiums/discounts.
Procurement fee
The parties have agreed that no procurement fee will be payable to Vitol Asia during the first five years of the term of the Vitol
Fuel Supply Agreement. A procurement fee may be payable following this period, if mutually agreed by the parties and determined
on the basis of prevailing market conditions.
Title and risk
Title to the Product in each shipment passes from Vitol Asia to Viva Energy as the Product passes on to the ship at the load port.
All risk in the Product in each shipment passes to Viva Energy on and from that time.
Shortfall
If, except to the extent that such was caused by Viva Energy, Vitol Asia is unable to source or deliver sufficient Product to meet
any shipment that has been nominated by Viva Energy, then to the extent of such shortfall, Viva Energy may, with the prior written
consent of Vitol Asia (not to be unreasonably withheld or delayed), enter into a short-term agreement for the supply of such
Product shortfall.
Guarantee
Under a separate but related document, certain members of the Group (including Viva Energy Holdings Pty Ltd and Viva Energy
Australia Group Pty Ltd) have guaranteed to Vitol Asia the due and punctual performance and observation by Viva Energy of its
obligations under the Vitol Fuel Supply Agreement. The Company is a guarantor in respect of those obligations.
Vitol Aviation Fuel Supply Agreement
Overview
Under the Vitol Aviation Fuel Supply Agreement:
• Viva Aviation agrees to provide refuelling services on behalf of Vitol Aviation to Vitol Aviation’s international customers that require
such services (Refuelling Services) and, among other things, must establish and maintain or otherwise ensure access and use of
facilities at airports necessary to deliver aviation fuel to Vitol Aviation’s customers; and
• Vitol Aviation is responsible for managing its international customer accounts in connection with the Refuelling Services.
Term and termination
The Vitol Aviation Fuel Supply Agreement remains in force until terminated in accordance with its terms, including for convenience
by either party upon 12 months’ notice, such notice not to be given prior to the fourth anniversary of the commencement of the
agreement.2
The Vitol Aviation Fuel Supply Agreement may also be terminated in the following circumstances:
• where the other party commits a material breach of the agreement, which is not remedied;
• where the other party repudiates the contract;
• where an ‘Insolvency Event’ occurs in respect of the other party; or
• where the other party suspends or ceases, or threatens to suspend or cease, carrying on all or a substantial part of its business.
Exclusivity
Vitol Aviation agrees to not utilise any party other than Viva Aviation in the provision of services similar to the Refuelling Services
within Australia, unless and except to the extent that Viva Energy is unable to perform the agreed services.
Pricing
Vitol Aviation and Viva Aviation must use reasonable endeavours to agree on a fuel rate and commission rate in connection with
each customer tender. Viva Aviation must invoice Vitol Aviation on a monthly basis in respect of sales to Vitol Aviation’s customers,
and Vitol Aviation is entitled to receive the agreed commission and fuel rate in respect of each such sale.
Hedge Agreement
Vitol Asia and Viva Energy Australia Pty Ltd are parties to a standard-form ISDA Master Agreement pursuant to which Viva Energy
hedges the price risks associated with the volatility of crude oil pricing. Each member of the Group has provided a guarantee to
Vitol Asia in respect of Viva Energy’s performance under this agreement. The agreement will remain on foot until terminated by
agreement of the parties or otherwise in accordance with its terms.
2. Continuation of the Vitol Aviation Fuel Supply Agreement for any period beyond the 10-year anniversary of the Company’s listing on the ASX will be subject
to shareholder approval, should ASX Listing Rule apply at that time.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018
Additional information
The information below is current as at 14 March 2019.
Share capital
The Company has 1,944,535,168 fully paid ordinary shares on issue, held by 13,636 holders.
Holders with less than a marketable parcel
34 shareholders hold less than a marketable parcel of shares (A$500) based on a share price of $2.57 per share (being the closing
price on 14 March 2019).
Voting rights
Shareholders in the Company have a right to attend and vote at all general meetings in accordance with the Company’s
Constitution, the Corporations Act 2001 (Cth) and the ASX Listing Rules.
Shares purchased on-market
During the period (from 13 July 2018 to 14 March 2019) shares were acquired on-market for the purposes of the Company’s Employee
Share Plan and to satisfy entitlements of the holders of Legacy LTI Options, which vested in January 2019. 6,939,839 shares were
purchased on-market at an average price of $2.485 per share.
Substantial shareholders
The following shareholders have disclosed substantial shareholding notices to the Company.
Perpetual Limited (and its related bodies corporate)
Legg Mason Asset Management Limited (and its related bodies corporate)
Viva Energy B.V. (now known as VIP Energy Australia B.V.), and each of VIP Holding
S.a.r.l., Vitol Investment Partnership Limited, Vitol Holding S.a.r.l. and Vitol Holding B.V.
Number of
shares held
215,108,489
97,855,495
871,845,097
Percentage
11.06%
5.01%
44.84%
1,222,415,012
60.91%
Shareholder distribution
Size of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total holders
1,935
3,959
3,753
3,860
129
13,636
Number of
shares held
989,004
12,782,934
29,298,282
88,944,503
1,812,520,445
1,944,535,168
Percentage
0.05%
0.66%
1.49%
4.50%
93.30%
100%
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Additional information continued
Top 20 shareholders
Details of the 20 largest shareholders of the Company are listed in the table below.
J.P. Morgan Nominees Australia Pty Limited
1 VIP Energy Australia B.V.
2 HSBC Custody Nominees (Australia) Limited
3 Citicorp Nominees Pty Limited
4
5 National Nominees Limited
6 BNP Paribas Noms Pty Ltd
7 UBS Nominees Pty Ltd
8 BNP Paribas Nominees Pty Ltd
9 BNP Paribas Noms (NZ) Ltd
10 Argo Investments Limited
11 UBS Nominees Pty Ltd
12 Citicorp Nominees Pty Limited
13 CS Third Nominees Pty Limited
14 UBS Nominees Pty Ltd
15 Pacific Custodians Pty Limited
16 Scott Wyatt
17 CS Fourth Nominees Pty Limited
18 Navigator Australia Ltd
19 AMP Life Limited
20 Neweconomy Com AU Nominees Pty Limited
Number of
shares held
871,845,097
319,143,730
177,142,918
142,319,567
69,170,142
65,863,511
31,400,272
24,422,889
8,949,464
8,000,000
6,465,114
6,133,858
5,994,874
5,937,224
5,689,156
5,191,066
5,096,159
4,307,037
3,246,764
3,207,140
1,769,525,982
175,009,186
1,944,535,168
Percentage
44.84
16.41
9.11
7.32
3.56
3.39
1.61
1.26
0.46
0.41
0.33
0.32
0.31
0.31
0.29
0.27
0.26
0.22
0.17
0.16
91.00
9.00
100.00
Total
Balance of register
Grand total
Voluntary escrow
12,689,271 ordinary shares are subject to voluntary escrow arrangements. The following escrow periods apply:
• 6,344,637 ordinary shares held in escrow until 30 June 2019
• 6,344,634 ordinary shares held in escrow until 30 June 2020.
Unquoted equity securities
The company has on issue the following unquoted securities:
• 1,600,000 performance rights, issued under the Company’s LTIP, held by seven employees.
• 16,534,520 Legacy LTI Options (at various exercise prices) held by seven employees.
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VIVA ENERGY GROUP LIMITED / ANNUAL REPORT 2018 Corporate directory
Head office
Level 16, 720 Bourke Street
Docklands VIC 3008, Australia
Telephone: 1300 554 474
Company Secretary
L. Pfeiffer
Share registry
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000, Australia
Telephone: 1300 554 474
Investor relations
Karla Wynne
Head of Investor Relations and Strategy
investors@vivaenergy.com.au
Website
To view the 2018 Annual Report,
Corporate Governance Statement,
shareholder and company information,
news announcements, financial
reports, historical information and
background information on Viva
Energy, visit the Company website
at www.vivaenergy.com.au
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