Viva Energy Group Limited (VEA) Earnings Call Transcript & Summary

Thanks, David, and good morning to you all. Thank you very much for joining for our Investor Day today. Before I begin, I'd just like to acknowledge country and pay my respects to the people of the Gadigal -- to the Gadigal people of the Eora Nation and any Torres Strait and Aboriginal people who are joining us either here today or online. It's been 2 years since we last held an event like this and an awful lot has happened in that time, both in our business and outside of our business. So it's the timing to get together. We've made significant progress on our strategic agenda over the last couple of years, as you would know. Certainly, last year, we delivered a record earnings for our business, certainly supported by our strong Refining margin environment, but also a really strong performance in the other parts of our business as well. An awful lot has happened in that time, both in our business and outside of our business. So it's timing to get together. We've made significant progress on our strategic agenda over the last couple of years, as you would know. Certainly, last year, we delivered a record earnings for our business, certainly supported by our strong Refining margin environment, but also a really strong performance in the other parts of our business as well. We've recently announced, obviously, the acquisition of the Coles Express business, which transitioned on the 1st of May, and the OTR business as well, which we're obviously just waiting for the finalization of the ACCC process. Two really transformative acquisitions, which we'll talk a lot about through the course of the morning. The commercial business continues to perform extremely well, delivering 2 years in a row now of very strong earnings performance as we've really upgraded the quality of that business since the pandemic. And obviously our Refining business has really been transformed as well back since the negotiation of the contract with government back in 2021 to underpin Refining margins on the downside and leave the upside open to the benefit of the company. But obviously, a bit more than that, provide the confidence in that part of the business to make some significant investments to set that business up for the future. So across all parts of our business, really some very significant achievements in a relatively short period of time. So as said, timing to come together today and give you a bit more detail on not just what we've achieved, but where we are looking to head over the next 5 years. Thanks. Thanks, David. A bit of recap for those of you not too familiar with the company and looking around the room, most of you will be. But our company has been trading in Australia for over 120 years now, began life as the Shell company here. One of the first -- or was the first oil company to began trading in Australia. So a really long heritage that -- in terms of activity of Australia and underpinning some pretty strategic positions around the country in all parts of our business. As you know, we supply more than 25% of the country's liquid fuel requirements. That gives us a really significant role in serving customers and has done for obviously all of that time. But more importantly, it gives us connections with a significant proportion of customers in our commercial business and, of course, consumers, which will, through the acquisitions of Coles and OTR, will give us a lot closer connection with our consumer, customers as well. And it's those relationships that really underpin the real quality of our business and also the strategies that we have for the future. We've substantially evolved the business since we became Viva Energy nearly 10 years ago. It's been an extremely eventful journey over that time. And I think what that points to, in my mind, is the capability of my team who are all here today to deliver some pretty transformational changes. Obviously, we have a number of -- a new [ chapter ] ahead of us with some significant transformational changes that we're about to embark on, but a high-quality team that I have great confidence in their ability to deliver on that and a track record to support that. In terms of our company, next slide, David. Today -- well, we started life as an integrated downstream oil company. But increasingly now, we really consist of 3 very different distinct businesses. Convenience and Mobility business that, in the future, will have OTR at its core. That will be our primary convenience brand around the country that will transition to over a number of years with real opportunities to become that convenience retailer that happens to sell energies rather than a fuel retailer that happens to sell convenience. I mean, that's the transition that we're looking to make there. And the acquisitions of Coles Express and OTR really give us the foundation to be able to do that. Our commercial businesses, as you know, are actually an amalgamation of a number of very unique businesses in their own right, largely focusing on commercial customers, B2B sales relationships and the supply of a whole range of products and services, not just your typical main fuels, but a really diverse set of specialties as well, which is the core of that business really in terms of the earnings potential and underpinned by that really deep relationships that we have with our commercial customers. So increasingly, a really strong Commercial and Industrial solutions provider is how we can start to think about that business. And then our traditional, I guess, energy businesses, Energy and Infrastructure, has Geelong Energy Hub at its heart, but it's actually supported by a very broad network of infrastructure investments around the country, not just import terminals, but inland depots, regional air fields, and increasingly, as we grow our business presence in just about every part of Australia to service whatever our customers need. So still a close relationship between the three businesses, but really quite different businesses with their own growth pathways and opportunities ahead of them. And as I said, we'll share a bit more of that with you today. Our group objective across all the businesses is fundamentally to drive growth -- so, David? Thanks, Dave -- is to drive growth of our non-fuels business. Non-fuels meaning products other than jet fuel, diesel and petrol. We see considerable life left in our traditional fuels, but really significant growth opportunities in our non-fuels businesses. So obviously, convenience and specialties being a big part of that. And that's been our focus since we had this Investor Day 2 years ago. The investments that we've made and the progress that we've made in building our commercial business and our convenience business really set -- in a very short space of time, starts to transform already what the earnings profile looks like. Once we complete on OTR, the earnings from our non-fuels business will be nearly double what it was prior to when we had last had this Investor Day, so from 15% to 30%. And obviously, with further growth ahead as we really rolled out that on the run off across the rest of the country and continue to invest in our commercial business as well. So quite a big transformation in earnings, changes the profile and I think changes the shape of our company in so many ways. Next slide, David. A lot of words on this slide, and you've seen it largely before, but in terms of the transformation that we're trying to make, as I said before, moving from a fuel retailer that happens to sell convenience in our Retail business to genuinely transforming into a convenience retailer that happens to sell energies. And that will be more than just fuel. That will obviously include electric vehicle recharging. It will be an important part of that convenience offer, but also hydrogen in the future as well and other forms of, I guess, energies and convenience offers that people are looking for when they're on the move. In our commercial business, we really are looking to sustain and grow that proportion of non-fuels earnings in that commercial business to over 50%. It's already there. We see opportunities to grow that further. That's all new growth for our company. It is very significantly more sustainable earnings for the future as well. So it's a very big part of our energy transition, but not forgetting that main fuels will be -- continue to be an important source of energy for our customers for a long time yet. And we'll have a key role to play in helping those customers, make their own energy transition as well. And we're already heavily involved with a lot of our customers on those discussions about what they can do to reduce their emissions. So that will also be a key part of that commercial business. And then for Energy and Infrastructure, as I said before, Refining remains a key part -- or the core of that business, but supported by a very significant supply chain -- set of supply chain infrastructure around the country. We'll continue to supply all our customers with the liquid fuels that they need from Geelong and through that supply chain. But we do see a real opportunity to leverage those assets to increasingly introduce lower carbon fuels, either making them at Geelong, and we'll start to do that next year when we start coprocessing at Geelong, but potentially dedicated processing into the future. And utilizing our supply chains to ultimately create a mix of traditional hydrocarbons and lower carbon fuels, which gives those -- that set of infrastructure, a very long life ahead. The reality is there's many applications out there, like flying, heavy vehicle transport mining, where the transition to completely renewables or electrification is a long way off. And being able to reduce emissions in the short term through lower carbon fuels is an enormous opportunity for our company and for our customers to help them on their emissions reduction pathway. Now in terms of emissions reduction, also speaking there, largely about Scope 3. Obviously, we are also focused on what we can do to reduce our Scope 1 and 2 emissions. 90% of our emissions are generated at our refinery in Geelong. So how we reduce emissions in that part of our business to achieve net zero by 2050 will ultimately depend on the role of Geelong at that time. And it's my view that through that period, which is obviously quite a long time, that Geelong will gradually transition from being a dedicated hydrocarbon processor to playing a key role in producing those lower carbon fuels, I just spoke about. That will be part of the journey for Geelong to reduce Scope 1 and 2 emissions to become net zero by 2050. In the rest of our business, so Convenience and Mobility and Commercial and Industrial, the other 10%, there are very much more near-term options for us to reduce emissions in those areas, most obviously in our Retail business in terms of solar on rooftops across the 1,000-plus stores that we'll have across the country. And obviously, benefiting from the greening of the grid as well. And we have, as you can see, a more direct pathway to achieving net zero in that part of the business by the end of this decade. Next slide, David. In terms of sustainability, emissions reduction is obviously a key focus for us, but we have quite a broad sustainability agenda. It's actually an important part of our social license, but it's also important part of our employee value proposition as well. And one of the big changes that are obviously right in front of us is the transformation of our workforce. With the acquisition of Coles and soon to be OTR, we'll move from an employee organization of 1,500 people to over 15,000 people in that time. That, on any measure, is a significant change for our organization, puts us into one of the top 20 non-government employees in the country. That gives us a lot of impact. It gives us a lot of contact -- direct contact with our customers the ability to shape their experience and obviously, the success of that particularly our Convenience and Mobility business. So it's a really exciting time for us. It's quite a unique model out there in certainly the [ petrol ] and convenience world. We think it's the right one, and we think it gives us enormous scale and potential to really leverage that motivated employee base to really make a big difference to that total customer experience. And so finally, the investment case for the company. I think this is a slide here just demonstrates the performance of Viva relative to the ASX 200 over the last 3 years. But if you go back to listing, we've essentially outperformed the ASX 200 consistently throughout that time. It has been and is a high-performing business. With the strategies that we have in place throughout our 3 parts of our business, our objective is obviously to maintain that track record, but accelerate that further to an improved valuation of the company by really starting to demonstrate the value that sits in the 3 different parts, really reposition the company from being seen as an integrated downstream oil company to being a genuinely high scale retail organization, a high-quality B2B sales organization and with high-quality Energy and Infrastructure assets that have a long life beyond hydrocarbons and start to really demonstrate the unique opportunities in each of those businesses are poised to progress and the opportunities to deliver improved earnings and very sustainable earnings over the long run in this organization. So that's the challenge for my team over the next couple of hours is to see out the case for that. And on that note, I'll start off with the one that I'm sure is the business that's -- most interest to everyone at this point in time, given what the investments we have made, and that is the Convenience and Mobility business, and welcome the CEO of that business, Jevan, to the table.

Thanks, Scott, and thanks, everyone, for joining today. Look, before we kick off, the team have prepared a short video, which showcases some of the best elements of the OTR offer. So if you allow me to take a moment, we'll play the video now, and then I'll kick into the presentation. [Presentation]

I know a lot of you have seen the offer already and had the opportunity to see the site. So for those that haven't yet had the opportunity, and for some of those that are listening overseas and internationally, hopefully, that gives you a bit of a flavor of the OTR business that we're seeking to acquire. Turning to the first slide. I'm going to talk a little bit about the convenience market, and I know many of you are familiar with this. But the opportunity in this market is significant. When you think about the growth in Australia in convenience store sales, we've seen almost 4% per annum over the past 10 years or so on a compound annual basis. And we've conducted a piece of market research, which reviewed over 28,000 on-the-go purchase occasions and learned that service stations serve only 14% of that on-the-go customer mission. And for obvious reasons, a more developed and fulsome convenience offer will allow us to service more and more of those occasions and compete in a wider range of sectors and spaces. And more importantly, service customers in a way that allows them to visit us more frequently more often. And the path we're on will make us absolutely a leading player and a really attractive business in this market and really well placed to take advantage of the size of the addressable market that you see on the far right of the slide. On the next slide, talking a little bit about retail fuels. It's also important to remember that this is a pretty attractive sector in which we operate. Our service station industry is a really resilient business. You can see from the chart, which demonstrates the industry retail margins, that they've continued to rise fairly consistently over the past 10-plus years, and industries displayed an ability to remain fairly rational and manage margin in line with rising costs to retain a fair level of profitability over time. You can see from the gold line, which sets out industry retail volumes, and the volumes have almost recovered to pre-COVID levels and look forward to seeing that return to 2019 levels in time. Over the next 2 decades, as EV penetration starts to grow, it will be clear that businesses that have a wider range of income streams, a wider and more fulsome convenience offer will require less of an additional margin need to cover costs to fuel declines. And more importantly, an important and dependable EV offer will be really critical to continue to have customers visit stores. And I'll talk a little bit about that on the next slide. No surprise that EV charging customers will have a longer dwell time at stores, and they'll spend more time at the site than a typical fueling customer. But most importantly, the reliability and the dependability of the offer is absolutely critical to ensuring a quality customer experience. Now some of the larger players globally quote that up to 60% of EV charging interactions fail at their sites. When you think about that in the context of filling your car with fuel, more often than not, you would come to site and have some sort of problem that either doesn't allow to charge or causes you to spend 2x as much time at the store. And when you think about that in the context of customer experience, it's absolutely appalling. So the absolute primary focus for us is developing an offer that's reliable and dependable and that works every time for customers and works well. It's also going to be critical to have a wider convenience offer. More of a QSR focus, the ability for people to come in, to sit down, to take a wider range of food, coffee, hot food. And as you'll see going forward, with the sort of offer that we're developing and that we will roll out with the OTR business, it will be very well suited to that. So we'll continue to work on developing that offer. And we'll look for locations that are most convenient to start to roll out some EV chargers in time and still pretty confident that there will be some opportunities for funding to support that as we look forward over the next 1 to 2 years and start to develop that offer out. On the next slide, we've set out our transformation and growth strategy, the pathway for the Convenience and Mobility business. The first step has really been to take control of the offer, regain the network that we've had for a very long time. The network that Shell had acquired in Australia, mostly between 1905 and 1980, a network that's practically irreplaceable today. So step 1 was take control of the shop, regain that, and we've done that through the Coles Express acquisition. And step 2 is really to extend the offer and the network, acquiring the OTR business so that we have the leading offer to roll out on the network that we've got. And setting ourselves on a path that will see us have a network nationally of over 1,000 stores. When you think about the Liberty Convenience opportunity that's coming and the pipeline of growth sites that we get with the OTR business, we will be a significant player in this market and have a network that's unrivaled. And the final step, the third step is to really transform the offer. And that's the work that will be undertaken to take the OTR off of national across our existing Coles Express and soon-to-be ready express network. And effectively bring the convenience offer that many people in the East Coast haven't yet seen to the rest of the country. There's 3 ambitions that we've set out and talked about with our team, and I'll talk about them a little bit more on the coming slides and why they're important. This next slide is a bit of a snapshot of our internal strategy presentation. I wanted to talk to this particularly because of the size and the scale of our business and the people focus that we have. Today, there's approximately 6,000 team members across the Coles Express, Reddy Express business. And there's another 6,500 or so that exist within the OTR organization. And as Scott touched on, as we roll out the wider offer, we'll be growing significantly towards 15,000, 18,000 people. We've got an absolutely top class team. I'm really proud of the people that have come together to run our Retail business as the Coles Express business transitioned. There's an absolutely fantastic team inside OTR, and I've had the opportunity to get to know a lot of them already. And less than 6 months in, as we rolled out this strategy across our business of 6,000 people today, we've completed an engagement survey and recorded the highest engagement score in more than 10 years for the business. So we've got a team that's highly engaged and focused on the mission ahead. The next slide sets out the first 2 of our ambitions. The first of which is to grow the non-fuel earnings contribution. And it's amazing when you look at the, called, the doughnut chart on the left. When you think about gross profit by source as recently as 2022 for the Viva Energy business, we really had a very small contribution come from shop being the small royalty that we received from Coles. And I'm sure there was a rent that we received, but the bulk of our earnings came from fuel. When you think about how the business changes going forward already, the red section of the second doughnut is the Coles Express contribution that we see today from non-fuel earnings in our business. And with the inclusion of the OTR organization, that acquisition, before we even commenced the rollout across the wider network, we will almost be at 50-50 earnings from non-fuel versus fuel. It's really significant when you think about what that does for the resilience of the business. And at times, we've seen a little bit of volatility in fuel margins, particularly when oil prices rise or fall, and there's a bit of a lag in passing on cost. And so having a wider, more diversified business with more income streams from non-fuel makes the earnings profile significantly more resilient. And that will be a key part of the path that we're on. The second part of this is our customer interactions on the right. We've done a bit of work to profile different types of customers and customer interactions. There's obviously a lot that goes behind those key profiles that are there. But what's really critical is that today, in our business, we already have over 3 million interactions a week, 165 million transactions a year. When you think about what that means, it means that every week, people are coming to visit our stores over and over again. When you put the 2 businesses together, and we become OTR, our ambition is to have more than 250 million transactions. And again, as we roll out the OTR offer across the wider network, this will continue to grow. When you think about what this means in practical terms, 5 million customer interactions every week, almost 30,000 every hour. Our objective is that our customers will know us, we'll be part of their daily routine, their regular habits. They'll visit us more frequently and more often than they visit anyone else. The next slide sets out our ambition for earnings. A lot of this information is public and will be known to you, but it's been published in separate releases in the past. The average EBITDA of the Viva Convenience and Mobility business over the last 3 years is about $225 million, $224 million. We talked about the contribution that we expect the Coles Express acquisition to deliver over time. We released that previously, $45 million to $70 million. That was really step one, taking control of the shop and the network. Step 2, where we talk about acquiring OTR business, and some of you will recall that we talked about $165 million in earnings contribution, that's unchanged. But you'll see from the footnotes that some of that is allocated to the Commercial and Industrial business for the small component of wholesale that sits within the OTR group. In terms of the Retail contribution, $95 million a year of base Retail earnings that will come into Convenience and Mobility and some synergy opportunity, which I'll talk about a little later of over $50 million. Step 3 is really extending and transforming the network and the offer. Completing the Liberty Convenience acquisition, delivering the OTR growth pipeline will see us add more than $50 million of EBITDA from those sites as they come into the network and then starting to roll out the OTR offer across the Coles Express and Reddy Express network nationally will see us deliver a further 50 plus in EBITDA. All of these things have potential to outperform. And when you add them all, we're well in excess of $500 million of EBITDA. And we've set ourselves a target to deliver this over the next 5 years. The next slide talks a little about the integration of Coles Express, step 1 in the plan, if you like. I just wanted to give a brief update on how that's tracking. I'm really pleased with the progress to date. We're about 6 months in. And when we talked about the earnings contribution of this part of the business in the original release, we used fuel volume to give a bit of guide as to the potential earnings range. But there's a number of ways that we're able to deliver that. I'm still very confident that we'll see volume growth across the network. One of the fantastic things that we've been able to do recently, which I hope you're all taking advantage of, is the recent double docket promotion. Again, a number of things, which you see set out on this slide that really our contractual relationship under the Alliance structure in the past didn't give us the ability to do. The short-term nature of the contract and the challenges of working on opportunities that had a longer-term payback or created longer-term business value was difficult to achieve. And so there's a lot of latent value that was left in that network over time. I'm looking forward to seeing some great volume performance of the double docket promotion. There's a number of other things, though, which I think will deliver some value. One is pricing and category initiatives. So I think very cheap in the shop, a Coles Express offer that's been positioned in line with supermarkets and cheaper than many of our competitors. And a fuel price that's been focused on Shell premium fuels and competing with our more premium competitors out there. The opportunity to balance those two, which we've worked in the past 6 months or so and continue to work is one that I think will provide more fulsome and rounded opportunity and offer for customers. Some of the operating cost improvements, things like the energy efficiency projects, which we haven't undertaken in the past because responsibility of the building set with Viva, but the electricity bills set with Coles, a range of those projects will deliver value. Some fit-for-purpose systems and our ability to exit the Coles transitional services arrangements will deliver some value as well. And amazing to think that of the 430-odd subtenancies across our network of some 700 sites, almost 100 of those have been vacant for some time and present an opportunity to add value. The next slide talks a little bit about step 2, if you like, the integration of the OTR Group and this acquisition. We're progressing well with the ACCC, and we've got an ongoing and open dialogue. So we're continuing that process. But given the time extension, expect that, that will complete in the first half of 2024, given we're so close to Christmas now. This slide contains a lot of information that I think will be familiar to you. The $145 million of EBITDA, as I mentioned earlier, is in line with the $165 million we published previously, less the contribution to Commercial and Industrial. The OTR base earnings on the far left consists of the $95 million from the previous bridge slide. And we've sort to break down some of the categories of the 50-plus of synergy opportunity that we'll see from the delivery of that transaction, whether it's fuel supply, the opportunity for IT rationalization from the combined Viva Energy, Coles Express network with the OTR business, and the opportunity to put above-store costs together, marketing budgets together, above-store procurement together and see some savings out of combining that into one fit-for-purpose business, not to mention the investment in digital that OTR has made and the ability that we'll have to roll that out nationally in a very fast way. There's a number of other things in there, things like convenience purchasing benefits, which we haven't yet had the opportunity to quantify for obvious reasons, competitive reasons, having greater scale should allow us to access some benefit in that space. So we'll look to assess that as the transaction progresses. On the next slide, we talk a little bit about step 3, extending and transforming the network. And it's really important to think about the scale of what we're embarking on here. The columns in the middle that you'll be familiar with shows the 706 Viva Energy Retail, Coles Express or Reddy Express branded sites, if you like. There's 174 OTR petrol and convenience stores out in the market and some 98 Liberty Oil convenience stores out there, too. When you put them together, it's obviously a significant network, but it's important to factor the growth pipeline of around 90 stores that sits within the OTR business as well. Even with some divestments through the ACCC process, we expect that this will take us to a network of over 1,000 sites over time. But more importantly, within that network is the story around quick service restaurants and something I wanted to take the opportunity to highlight. Today, within the OTR business, within and in addition to the 174 sites, there's some 100 QSRs and stand-alone convenience stores, things like Hungry Jack's, GYG, Subway. Within our Coles Express network today, there's about 430 subtenancies. I mentioned that 100 are vacant. So we'll have the opportunity to move quickly into those. A number of others are subleased to operators of generally quick service restaurants and in some cases, automotive workshops, but all represent opportunities to either expand the footprint of the store or take on a quick service restaurant under our own operations. And when you combine this with the specialty retail stores that exist in the OTR business, we'll be fast pushing a pathway to a network of almost 2,000 individual outlets and all run under company operations. So a fairly significant operation and operating across quite a range of sectors that we talked to on the first slide around the convenience market. The next slide talks a little bit to the brand transition and gives you a bit of an indication of the work ahead to rebrand and transform stores. Of course, we won't get to every OTR store straightaway. We've got some contractual arrangements with Coles to debrand and remove the Coles Express mark. And you will have no doubt seeing the introduction of the Reddy Express brand. It leverages the familiarity of the existing offer in a way that customers should be comfortable with what they see, but gives us the opportunity to make some further improvements to the existing offer ahead of the transition to OTR. Of course, we'll try to get some sites direct to the OTR offer. And the great thing is that over 50% of our network, some 55% of our sites have a building footprint that is big enough for an OTR to go straight in. Of course, that can be done in a relatively low-cost way. But as we progress, we'll measure the performance of those sites, we'll track the size and quality of the uplift. And of course, if we see outperformance, greater returns, then there's obviously opportunity to expand that and do those refurbishments and refits in a way that's more fulsome and will add further value. Our estimate of initial CapEx is about $50 million per annum. We've published that previously. It is net of landlord funding and the opportunity we have with a network with a significant number of well-funded landlords is to obviously use that to appropriately fund some of the works, especially where they result in major improvements to sites and buildings. The chart on the bottom left gives a bit of an indication of the types of work we will do on sites, a basic rebrand, a basic conversion, a remodel, a major refurbishment and in some case, the full knockdown and rebuild, but will see us take the majority of the network to a full-service OTR offer over the next 5 years or so. I'll turn to the next slide and just talk a little bit about the potential of this business and the sort of metrics that we published today, the metrics that the OTR business publishes and some of our leading overseas peers, some of the global leaders, if you like. Already, in Australia, the offer that we have, the Coles Express network, outperforms the industry average, but from an average sales per store perspective, but also from shop-only transactions perspective. When you think about the OTR business, the opportunity is obviously significant. Store sales that are more than double the existing network, a shop gross margin that's higher because of the mix shift towards food, QSR, higher-margin products and a much higher proportion of shop-only transactions and gross margin contribution from non-fuel. I'm not saying we'll take every store to exactly those metrics, but I think you'll be able to see from the numbers that if we move in that direction, the opportunity is significant. What's amazing is that when you look at some of the global leaders in the space, global leaders that are very highly valued, they've got metrics that are somewhere between the 2. From a shop-only transactions perspective, they're more in line with OTR. But from a sales perspective, and those numbers are converted to Australian dollars, and from a gross margin contribution perspective, they're somewhere around OTR or a bit below. And I think very quickly, we'll be able to take this business to a position where we compete pretty aggressively with some of the global leaders in the space. It's amazing when you think about the digital experience as well, and I just wanted to call this out, the last bullet point. And the OTR business today, some 17% of all fuel purchases are processed through the app, the Pump, with the scan pump save promotion that they run and almost 30% of coffee purchases are processed through the app, preordered and ready on arrival. When you think about the opportunity to roll that out nationally and where that could go in time, the ability to talk to those customers, to track how often they purchase, what they purchase, what their preferences are and to provide them with tailored and curated offers that suit them and their habits, the opportunity is huge. The final slide talks a little bit to the uplift potential and the valuation opportunity. We talked about the EBITDA potential, the $500 million, that's our 5-year target, not to forget the plus. So a little bit of work there, but I think a fantastic opportunity with opportunity across a range of different segments and areas where we can outperform, deliver in excess of $500 million of EBITDA. When you think about the way the Viva Energy business is valued and you compare that to the way that some of our global peers, some of those leading players that I talked about on the previous slide are valued and considered in the context of the quality of their petrol and convenience business and the path that we're on to build a business of similar and hopefully better quality, the opportunity for valuation, uplift and to outperform is significant. I'll pause there on Retail, and we'll move into some Q&A, which Scott will facilitate. Thanks.

All right. So we've got to about 10:30 for Q&A. Let me start with you, Michael. I think you're first to get your hand up. And Julia, if you could keep an eye on people for the hands up and move around after.

It's Michael Simotas from Jefferies. The first one, just so I understand, or make sure I understand the CapEx plans for Convenience and Mobility correctly. So you've said $50 million per annum. It looks like the transformation takes about 5 years. So effectively, are you telling us that you can completely transform the network by spending $250 million CapEx? And if that's true, is that over and above sort of normal level of maintenance CapEx for that division? Or is that the total CapEx? Because it seems like quite a low outlay to rebrand the network to the extent that you plan to?

You want to kick off on that?

Thanks, Michael. Yes, I think it's important to think about the landlord funding component as well. There's probably two aspects. One is the ability to work within the leasehold model that we've got, which we've proven over time is fairly capital light, to find ways to fund redevelopments of stores. The sort of uplift potential that we'll see will more than support a landlord funded model. But at the same time, I think there'll be certain elements that we want to fund with our own CapEx. You'll note that the 50-plus approximates about a 20% return on the $250 million over time, and we'd see that as a minimum for us to continue to roll out the offer. At the same time, I think the potential to see that outperform and see stores that do significantly better than we expected is there. And as we see that, the opportunity to lift the investment on the back of higher returns will be available to us as well. And so I think we'll track that progress as we go. And if we see value in extending the CapEx, then it'll obviously be for a good reason. That will be over and above the normal maintenance CapEx of the business.

And Michael, we'll come to the -- give you a bit of more context on the total capital and how it fits in with the broader capital, but later in that session here.

And then just a more housekeeping question. On OTR, it looks like the overall earnings contribution is unchanged, but the base earnings have moved up a little bit and the synergies moved down a little bit. Like I think you were talking about $60 million before, now it's $50 million. How should we think about that change?

Unchanged. We've allocated a little bit of the synergy to Commercial and Industrial, a little bit of the base earnings to Commercial and Industrial. And so when you think about one element of the synergy being fuel opportunity, some of that will follow the wholesale business and the rest will stay. And so the $165 million, the $105 million and the $60 million is not changed, but the slide is allocated a little to Commercial and Industrial.

David Errington. Listening to you, I got exhausted with the task at hand that you've got. And that's not a statement that's leading into a question. This is probably one of the biggest transitions I would have seen in all of retail history, to transition to go from 1,500 employees to 18,000 in a short period of time. You talked about synergies, and you know what my view is on synergies, they literally don't exist because the costs that you got to do to get them more than offset. So I want to talk -- the questions I'm going with this is the soft capital questions. How are you going to integrate that increased number of people at one hit? What systems are you going to be able to have to put in? How are you going to incorporate the people to adapt to those new systems? Because just to put a new system in, you've got 6,000 Coles employees, the culture is completely different to the culture of On The Run. I'm really interested to know how you're going to handle because the investment case is compelling. There's no question the assets on the ground. If you can pull it off, there's huge upside. But underneath that business has got to come to soft capital. What are you going to be able to do? How are you going to be able to attract the talent? It just seems to be a really big task that you're taking on. And it looks to me what will trip you up is those soft capital, the employment, the ability to attract talent, getting the best retailers. There aren't many good retailers out there in Australia. You've obviously got one in [indiscernible]. How are you going to pull it off, Jevan? Big question. But this is a defining moment for the company, how are you going to pull it off?

So why don't you touch on the soft stuff, soft issues that were raised and then talk about the platform development we're doing.

Yes, it would be great. Thanks, Scott. Yes, it's definitely a big task. I think the good thing is there's actually quite a lot of alignment in the culture between the Coles Express operations part of the business and the OTR operations. And I think it's important to think about the business in different parts. When you think about 6,000 staff, some 5,700 of those are people behind the counter in store, and there's some 300 in-store support center. Think about the OTR business, it's similar. Some 6,000 behind the counter in stores and some 500 or so in the store support center. The culture in the operations parts of the business are actually very similar and very aligned. The person who runs operations in OTR today is an ex-Coles person and a person who runs operations for me in the Coles Express business today is an ex-Coles person. And so I've been actually quite impressed at the cultural alignment that exists already between the 2 businesses, and that's a great place to start. I think the challenge in the work for us will be in the store support center. It will be putting together the new elements of the offer, the product innovation and that focus, and we're obviously starting with a great base with the OTR business. You talk about retaining and attracting talent. I mentioned earlier, we ran an engagement survey, which has put out a result that's the highest in more than 10 years for the business and one of the highest across the Retail sector. When you talk about some of the talent that we've engaged externally and some of the people that we've brought into the business already, the excitement around the story and what we're going to embark on is huge. Most people in the retail space look at this and understand that there probably won't be an opportunity of this scale and nature for many years to come. And the amount of people that want to be a part of that and the amount of quality people that want to be a part of that is significant, and I feel really good about that.

So are you getting people in from other retailers? Can you do that? Is that what you've been able to attract?

We have some of the leadership team ex-7-Eleven, some are ex-Audi, Coles, Metcash. Some are ex-Coles, obviously, that came across with the business. There's some ex-Viva people. We've got a real mix already, and that's within Coles Express business that's come together. There's obviously the OTR business, which brings its own diversity of people.

Before I stop, you haven't quite answered the question on the integration of the systems.

I'm going to get Amanda to touch on the work we're doing on platforms. But I might just add a bit to what Jevan said on the soft capital side. I mean, I think I'm not surprised the engagement score has been as strong as it has because my own experience in getting out to sites and starting to meet some of the team on the ground is that, firstly, Coles have actually run really -- done a really good job running a good Retail business. And so we've inherited all of that, and that's evident in the quality of the people at the store level and in the regions as well. So we start from a very strong base, it would be my perception. And yes, the motivation at the store level in terms of the people that ultimately deliver the customer experience every day has been, without exception, in every store I've been to extremely high and mostly because of the business has now moved from being a small part of a big company to a big part of a growing company and with a lot of ambition ahead of it and a real life of excitement around what's ahead and to come. So you start from a very good place. And as Jevan pointed out, we've a pretty strong set of retail leaders as well that we've inherited.

And I think that comes from a [ system ] perspective as well because if you think about Coles, it's one of the best retailers in Australia. And the Coles Express business has had that opportunity to leverage those systems. One of the strategic rationales for acquiring OTR is its IT platform. So they've already put in place an ERP system. We're in the process of putting in our HRIS system as well, so to manage those people from a digital perspective. The good news is we've already started that journey. So even though we haven't got the regulatory approval yet as part of [ The Bend ] sponsorship agreement, we've got a copy of the instance of OTR's ERP. So we've already started that migration, and we've actually now put into place all the requirements for the Coles Express business. So that comes with some fantastic retail capability, and we're taking the best of OTR as well. So we've already started that, and the next phase is to build and test that. So we've got our first store [ pilot circuit ], will go live in March, so for the Coles Express business or the Reddy Express business. So some very good capability that we've already started from a systems perspective.

Scott Ryall from Rimor Equity Research. This one, Scott, I think this is for you. I was just surveying the titles of the full bench. And I was just wondering if we can read anything into the fact that everyone who's got a kind of cross company role has a chief and an officer at the end. Most people with functional responsibility and P&L, [ EGMs ], but Jevan's the CEO of Convenience and Mobility. Is there anything to read into that? And -- I mean, 25 years structurally, it's anything that you're trying to put into place for us to think about the structure of the business going forward?

Yes. It's actually a good question, and it's very deliberate. So the Head of Retail was previously EGM of Retail, and that was at a point when our Retail business was really a property management function and fuel offer. We didn't have anything to do with convenience because that was run by Coles and the Coles Express. So with the acquisition of Coles Express and OTR and obviously, the largest upscale that, that has in terms of activity and people in that organization, we have deliberately set that part of the business up as a very stand-alone organization with all the functional support that needs to support that rather than providing that at the group level because it recognizes that running a Retail business with, I guess, starts off at 13,000 people is very different than running a B2B sales organization and a refinery and infrastructure to support that and the culture that you need to support that organization is very different. So we've deliberately set that up quite independently. It's part of the group, but it will run very much on an independent basis so that we obviously protect and preserve all of that, but we also start the benchmark and think about our business relative to a very different competitor set than what we've traditionally thought about. And so that, I think, sets that business up to be much successful in that environment, hence the appointment of a CEO level rather than an EGM level to run that organization.

All right. Great. And I'm not sure if this is for Amanda or Jevan. But maybe Amanda, just quickly the follow-up. Am I correct that in Convenience and Mobility, you're going to use the ERP of OTR?

We are. So we've got a clean instance of that at the moment, which was part of The Bend agreement, the sponsorship of the track. So we could do that independent of the regulatory process. So we've been able to -- we're our partners of Microsoft, so it's part of the ERP. So we've been able to leverage that with the work they did in OTR, and we've also got some of the OTR team that are supporting those as well. So we've already started. We've been going for about 16 weeks already.

Reverse systems takeover...

They do.

And then my last question, just on -- and I think it's wrapping up, Jevan, what you were saying about going to 250 million transactions and maybe with the OTR app and things like this, this is going to be the answer to your question as well. But what you're doing in terms of knowing your customer loyalty, that sort of stuff?

I think we're in a fantastic place. We've got the flybuys program that we work with under the existing Coles Express offer, and we shouldn't discount the quality of the flybuys, the power of the flybuys loyalty program nationally. It's something that has served us well over time and continues to. And so we have that in the base business. The opportunity within OTR and the digital presence that they have is huge. And when you think about some of the stats that I mentioned, the number of transactions already running through that app, I mean, isn't rivaled by anyone else in the market. And so our ability to talk to customers more often and more regularly and integrate that across the largest network in the country is going to set us apart completely from competitors. Now the big questions we're going to have are going to be how do we connect that with Shell card, with flybuys? What does that look like when it all comes together in one business and one organization, and we're starting with fantastic and well-recognized brands in all corners. And so the opportunity ahead of us is great.

Dale Koenders from Barrenjoey. I had some questions around Slide 21. So I don't know if we can bring that back up. But just in terms of the waterfall slide, Jevan, the earnings outlook, you called for $500 million plus, which we can all add up, actually gets to $550 million on the slide. Consensus is actually at $350 million of EBITDA. So there's really 2 questions, is either a hesitancy of consensus to model this or laziness, or there's a view around risk, that there's risk and timing associated with these buckets. I was wondering, could you maybe talk through each one of these columns that you've gone through? And just in terms of what is the time frame you're sort of hoping to realize this earnings uplift on the business? And how are you seeing the risk profile of each one of these? Is this maybe low risk for OTR, where you're just plugging the earnings of another company? Or is there some elements of this, which are hard and at risk?

Yes, sure. I appreciate the question. And I'll refrain from commenting on the laziness. But when you think about -- I mean, the first column, the $45 million to $70 million, that's really the contribution from the Coles Express business, which we said would come post integration. We talked about a few year period to integrate the business, and we're well underway in that path. And so I feel very comfortable about item 1. When you look at Item 2, the $95 million is the base earnings of the OTR business, and we're obviously subject to the regulatory process, which we expect to complete in -- and conclude that and complete on the transaction in the first half next year. And that $95 million will effectively add on to the existing business from the point we complete onwards. The 50-plus of synergy or opportunity, David, there will really come from a few different areas. One will be rationalizing above-store procurement costs, one will be marketing. When you think about it at the moment, we're marketing multiple brands. There's BP out there, the Shell, is Coles Express is about to be ready expressed and OTR moving to a position where we have one fuel brand and one shop brands will obviously give us the opportunity to rationalize that. The IT rationalization is a big part of that. And having to move off the Coles transitional services arrangements, what would have been building our own stand-alone ERP system, but being able to take the work that OTR have invested significantly and will give us an opportunity to make some savings there, too. And so I feel pretty comfortable that over the transition period, we'll be able to deliver on the 50 plus. When you think about the third category there, the light blue 50 the Liberty Convenience business already exists. We own 50% and it's equity accounted. We have the opportunity to acquire that at the end of next year, and that's known, and we'll add on to the existing business and the OTR growth pipelines currently being developed. They're real sites in really high-quality locations, and we're seeing some of those come to life already. And the 50 plus is really the opportunity for us to roll out the OTR offer nationally and start to see some uplift across sites, and that will take them more time. And we tend to think about that more in the context of a 5-year window. And so when you think about each of those buckets, the certainty that already exists within them and the opportunity to outperform and add up to well beyond 500, as you say, I think the opportunity for that sort of 500 plus is really real.

Gordon Ramsay, RBC. Jevan, just a question for you or Scott, about the ACCC and what assumptions you might be making in your numbers going forward with respect to site rationalization, particularly in Adelaide, obviously, there's not too many sites outside of that. Just interested in what impact that might have and how basically it affects your forecast.

Yes, that's factored into the numbers that we've put out on the bridge. It's public now that we've proposed to divest 23 sites to the ACCC, and they have made that public in some of the market feedback that they have sought. We've got approximately 40 sites in South Australia under the Coles Express brand. And for obvious reasons, it's not the biggest state and the biggest part of our national network that exists today. We proposed '23, I expect that we'll continue discussions with the ACCC but feel fairly comfortable with that one having material impact. And the real rationale for the transaction is the convenience offer and it's not about consolidating fuel market share or number of sites. When you think about the opportunity to bring the convenience of it nationally, that's really been our focus. And I think the ACCC understand that.

Rob Koh from Morgan Stanley, and I'll just on up that my consensus contribution is more to do with mobility rather than my laziness. So my first question is about the app. And if you can give us some color on how to think about that. Does the app have kind of help with the throughput of your commuters and your professional transporters? Or does it increase the average basket size of your community entertainers or how does it work?

I mean the real key benefits that it means people come to you rather than anyone else, and they come to you more often and for more. And as you learn what those customers buy and their patterns of behavior through the app, you can make them offers that bring them back to you more frequently again, and you basically create sticky customers. Now you see that a little bit in South Australia where OTR has got a large network. It's harder outside of South Australia, where there's only a few OTR sites. But once we're able to take that OTR offer to all of our network and have the scale of network and the presence in the East Coast and the rest of Australia, I think you'll see more and more people relying on their app relying on their OTR stores, but much more than just fuel.

Okay. And my second question is, I guess, a broader question, given that you have a synergy/opportunity with the integration here, can you talk to the compliance aspects of your supply chain with quick service retail, you'll be having rubber gloves. You'll have lots of employees working odd hours of the night from different sections of the community. You do also have the tobacco sales and there's some very well publicized incidents there. I'm sure you guys are across that. But if you could just talk to the systems to protect your people to protect the company.

Yes, thanks. You'd be surprised you often wear rubber gloves in the fuel industry as well. But I think the sort of organization that we are is one that has a safety focus and has had for more than 100 years. When you think about the way Coles operate and the practices in their retail business, there's some really strong practices around food safety, food handling and employee safety statistics across operations. And we've been in a really good place with Coles Express business, where we've seen safety stats continue to improve year-on-year over the past 5 or 6 years, and they've been a real standout in the Coles Group, which is fantastic. The OTR business is in a really good place, too. They've got scale, both in petrol station operations, but also in quick service restaurants. They're operating almost 100 quick service restaurants today. They're the largest franchisee in the Southern Hemisphere for Subway. They've got some 20 Hungry Jack's stores, and it's an area in which they're well versed and well-practiced. And they've got some really high-quality standards and practices in place, both around food safety, but also employee practices and employee safety. And so I feel fairly comfortable that as we bring that together, we're going to have a platform that will enable us to scale nationally. And a big part of the transaction and the path that we set on was making sure that when we bought something when we found an offer, when we put these businesses together, the platform was scalable to the sort of path that we're embarking on. I feel very comfortable that it is.

I think it's one of the areas, whilst the risks are different, Rob than they're part of the business. The -- I mean, obviously, we've got a long legacy of managing pretty significant risks in our current business and the approach to how you manage those risks is actually not all that different. And we start with good systems in place anyway, but I feel pretty comfortable about evolving our safety systems to manage what you -- as you point out, a lot more diverse range of issues to protect people.

Tom Allen from UBS. Can you please talk to some of the assumptions that are implied in the target to lift EBITDA on C&M to $550 million in 5 years relating to two of the bigger headwinds in the industry at the moment around falling tobacco sales and sluggish retail fuel volume growth.

Yes, sure. I mean, on the tobacco sales, it's no surprise that the real challenge in that space at the moment is illicit tobacco. Cost of living pressures have put pressure on people and they have turned to effectively stores that are selling illegal tobacco and you're seeing a real rise in that. The interesting thing when you look across our network, particularly even the Coles Express network and before you factor the strong performance in OTR is that we're seeing really strong growth ex tobacco. And we're seeing fantastic growth in categories like hot fast food, pies, some of the donuts, coffee, those sort of categories where sales growth there is such that when you look at the margin mix, we're actually moving forward despite falling tobacco sales. When you think about the introduction of the OTR offer and the fact that they are even stronger in that sense, and the growth that they're seeing in the food categories ex tobacco is more significant than what we see for obvious reasons because of the nature of the offer, I feel fairly comfortable that we'll be able to weather that and continue to grow profit in a way that others in the industry won't. Of course, if the government was to do more on illicit tobacco and combat that in a bigger way, it'd obviously be a boost for industry, but not something that I think is necessary for our business. Fuel volumes, I think, is an interesting one. It's been a little bit subdued over the past few months. I think as I'd hoped we would come out of COVID and see people travel a little more, perhaps the high oil price has dampened people's travel a little. At the same time, going into Christmas, you tend to see stronger volume months seasonally as people travel more, visit people. We're in the summer months right across the East Coast and so you tend to see a bit of stronger volume and no surprise that we've ramped up the promotional activity into this period. So hoping that, that is just a matter of timing.

Okay. So on those building blocks on Slide 21, if we were to assume that those current trends around tobacco held without major change, all of those incremental building blocks would still be intact?

Yes. I don't think they present a material risk to the earnings here.

Okay. And just a little bit further on the fuel volume growth. Traffic ingestion data recently showing that in most major cities there's actually been higher activity. The fuel volume growth has been quite sluggish across the Viva network. Can you comment on how you're thinking about your board pricing strategy? Is there any -- you mentioned some of the installed promotions or double docket and things like that. But the difficult market at the moment with a premium pricing -- premium-fuel pricing strategy to drive that volume growth? So is there any new thinking on that front?

Yes, sure. I mean, if you look at Slide 16, actually, the industry volumes have lagged a little. And while Mobility data has been different in different states, from an industry perspective, I think we're still down around 5% or so relative to pre-COVID levels. We've tracked pretty well in line with that and no surprise, given we're a more metro-focused network in the context of Coles Express, the old Alliance Network. And so I think we're tracking in line with industry and perhaps even gaining a couple of points of share. At the same time, we've moved away from a fuel premium price strategy some time ago. And when we took back pricing from Coles in 2019, we pretty quickly became more competitive and even more recently in the past 12 months or so as we've embarked on this more convenience-focused strategy. We've sought to position the offer more in line with convenience competitors rather than solely premium fuel brands. And we've seen some benefit from that already. I think things like double dockets and other promotions will continue to drive that focus over the next 12 to 24 months, and -- but in a measured and sensible way.

Perhaps just one extra comment just on the broader strategy around dealing with shifts in consumer behavior and whether it's fuel or tobacco or anything else that comes up, I think we have taken a view across all of our businesses that we're clearly going to I mean we're always in a time of change, but probably a material change in the next decade, whether those categories or others. And our approach to defending ourselves against that is really trying to leverage our positions to increase the diversity of our earnings base. And we've done that very successfully in commercial and industrial. The step into Convenience gives us an opportunity to do the same thing in Convenience because we can't arrest some of those material shifts in consumer behavior, but we can insulate the business by being developing other earnings, streams and leveraging for the core asset and retailer, the core assets created the real estate than the people that work there and the service that we provide. So I think diversity is a key part of our broader strategy and diversifying the business. It's something we obviously have been very successful and want to have bit of a part of our DNA across the whole company.

Mark Wiseman here from Macquarie. Just a couple of questions. Firstly, on the Smokemart, Giftbox business. What's your thinking now on the stand-alone Smokemart stores in shopping centers, and could you talk about how many sites have Smokemart within the service station, and does that give you procurement benefits on the tobacco side to retain that business? Are there parts of that you're thinking of divesting?

Yes, sure. It's probably a bit early to talk about divestments. We're still focusing on the completion and acquisition, but I hear what you're saying. I mean it's a pretty small overall earnings contribution and not critical to the business and obviously not part of the key rationale in the context of the OTR convenience offer. Most of the OTRs do have a Smokemart concession in stores, if you like, but it's really just a core tobacco offering with Smokemart brand on the top of it and so not too different to what you would see in a normal service station, generally just a little bit more [ SMIC ] like most of their offer. When you think about the wider Smokemart and Giftbox network, I mean, it really is a specialty retail sort of business. They've been big and growing in the gift wears and the gift box space, and that's been a big category growth for them. The stores inside supermarkets, shopping centers, they still tend to perform pretty well. But over time, most of those stores and outlets have pretty short leases. They're not like service station properties where the investment in the site is significant and say you tend to focus on a 15-year plus lease. Those are smaller specialty retail stores with kind of 5-year terms and rolling. So I think there's plenty of opportunity to manage that over time. And but for now as long as it continues to add value and add to profit contribution, then I think we'll obviously continue to run it.

Okay. And just on the ACCC process over the OTR transaction, they talked about looking at Convenience retail, I think that was one of their bullet points in their release, and they also talked about wholesale arrangements. I'm just wondering how much of this process is the traditional petrol site competition within a certain radius? And how much of it is a discussion around these other elements?

I think the focus of the ACCC has clearly been on fuel industry. That's been a big focus for them over time, and there's been some major transactions in the space of interest. So I think that's where most of the conversation is. I won't comment on the specifics, but feel fairly comfortable that they understand that the rationale for the transaction is more about a convenience offer and less about scale benefits or fuel market share or anything like that.

Thanks all. Henry Meyer from Goldman Sachs here. Would you provide a bit of extra color, please, on Slide 26. Just on the shop metrics for OTR in particular. Can you provide a bit of a split as to how those metrics differ for different OTR formats, excuse me. So whether it's a stand-alone OTR combined with QSR or QSR stand-alone.

Yes, sure. When you think about the number of QSRs in the network, it's a little shy of 100. We talked about 100 QSRs in stand-alone convenience stores. When you work that through, it means that some stores have multiple QSRs. So actually more like less than half of the OTR stores in the network have a QSR in them. And when you back out QSR sales, the metrics are still fairly significant. The average shop sales are still more than double the Coles Express shop sales and the metrics down that column don't change all that much. It's a pretty impressive offer. When you think about the nature of coffee, the Barista coffee element, and they've really been the only ones that have been able to make Barista coffee in the service station space work effectively and highly profitably. When you think about things like the hot food offer that's built into counters, they're almost moving into a space where each service station is a mini QSR or a sort of half format QSR in its own right with hot dogs and a range of hot food. And so you see those metrics actually across a lot of sites, whether they have QSR or not, and whether they're large or small. And I think over time, as we start to get people more familiar with the offer, even the smaller sites that have them in OTR offer will be able to perform in line with that.

David, any questions online? No. Okay. Any final questions before we break from -- Mark?

Just on the West side sites, I think you're quite 40 or 50 West sites a number of years ago. I noticed some of them have been rebranded to other brands. Have you let go of that network? Or are you still supplying wholesale?

Still around. Most of it was a bit less than that, but most of them have been absorbed into our wider network. Some are run by Liberty today. Some have become part of the dealer network, some in the sort of broader Coles Express or company operations part of the business. And so it's been more of a smaller bolt-on that's been absorbed into the wider business.

Maybe time for one more. Mark? Mic is coming.

I can't help myself. I couldn't remind myself. I've led the sales side. Just a quick question for I guess, Scott and Jevan. You talked about the $50 million uplift from bringing the OTR network into the Coles Express network, unless my math has failed, I mean, you're talking about 80% of the sites converting to that. That's what, 550 sites Would you, and I guess the people joining you in this really be happy if you get less than $100,000 EBITDA uplift per site?

Don't forget the plus, Mark.

Because you missed the 0 after the 50.

No, look, I think the opportunity to uplift the sites is significant. I mean, when you think about the sort of potential store sales per store, on Slide 26, we were talking about the metrics moving from $1.6 million a year of shop sales up to anything like the $3.9 million of OTR sales is obviously well in excess of $50 million. I think at the moment, we're talking about spending $50 million a year in net capital, and we're targeting a 20% return on that, which is the $50 million plus. I'm very hopeful that we'll see uplift that's well in excess of that and some really strong performance, particularly across the larger format sites across the country. But at this stage, we give that as a bit of a marker and we'll obviously do our best to outperform.

I mean so I guess asking the question in a different way. When you look in South Australia where you've got details, OTR is making considerably more than 100,000 per site -- your sites.

Absolutely, they are. Yes.

That's the plus, yes. Okay. Look, we'll take a break now. If we could -- if I could ask everyone to sort of reassemble about 10:45, so we're ready to get going at 10:50, that would be great. [Break]

All right. If you could please take a seat. We'll return. Thanks, everyone. We'll now discuss the rest of the business and go through capital management. We'll go to Q&A after that, and then Scott will conclude with closing remarks. I'll now introduce you to our Head of Commercial and Industrial, Denis?

Thank you Dave. So we've heard about the fantastic opportunity in our Convenience and Mobility business and the cash needed to get to the $500 plus million. So let's not talk about the machine, it's going to generate the cash that Jevan needs to invest. Good morning, everyone. My name is Denis Urtizberea. I'm French, as you can hear it. I have the immense privilege to lead the Commercial Industrial business at Viva Energy. So welcome to B2B, the crazy good place to be as we are famously known within our organization. Can I get the first slide, Dave, please? So at this first graph suggests, C&I is on a nice trajectory. And our focus on value and building on competitive strength is delivering strong results. Last time we had that kind of meeting, I think, end of 2021, we're talking about the resilience of our business during the toughest time of the pandemic and our journey to recovery. We are talking about the critical importance of cost discipline, but without putting at risk the retention of our capabilities. We are talking about our commitment to reinforce our investment in customer relationships, even on a virtual mode. It has paid off. And we have since then confirmed our successful trajectory. Last year, we saw strong demand in the resources and transport sectors in particular combined with sales recovery, partial sales recovery in aviation and marine. So despite volumes being down 10% compared to pre-COVID time, we delivered 80% earnings growth versus 2019. This reflects our relentless focus on lifting sales in segment offering highest value and return. This was made possible by the deep value-led relationships across high-quality existing customer base, combined with aggressive commercial focus to win new customers. It takes about three years to win a customer in commercial on average, and we have won more than 100 in the last three years. The signature of new contracts with strategic customers like ADF, Australian Defense Forces for Royal Flying Doctors are just iconic examples of our success in the last three years. Fair to say, and we have discussed that with a number of you that we also benefited from advantage procurement arrangements during periods of intense volatility. Our relation with Vitol not only protected us during COVID, but proved to be a key asset to boost a few opportunities across several segments. Spectacular first half of this year is ideally positioning our Commercial Industrial business to deliver a new record performance in 2023. Next slide, please, Dave. Our strategy is pretty simple. It's nothing less than a transformation and a growth strategy to deliver a reliable and attractive cash flow through unique competitive position. We are on track to move from being a traditional commercial fuel supplier to become a trusted commercial and industrial services and solution adviser. This strategy is very clear. We call it agile, aggregation of demand, generation of value, innovation, leadership in everything we do and engagement of our staff. We focus on the perfect execution of the strategy. We believe in the execution of the strategy. And we have already made significant progress across three pillars that support our current and future performance. Number one, outperformed the competition by building our unique position. We want to be a clear #1 wherever we are playing. And if not #1, a close #2 that is ready to contest a leading position. We have a high-touch model. We have now well over 200 people in sales and technical support in Commercial and Industrial. And on average, those people have spent already more than nine years in our company. That is more than 2,000 years of experience that is quite unique in the market and very hard to replicate. On top of this, we have about another 200 people who are supporting our business in supplying logistics in particular. We have a strong national and regional coverage and presence. We'll come back to that. And as you probably all know, we have a unique, diversified portfolio of products and sectors and we'll come back to that later on as well. So #1 building on unique position. Number 2 is continue to grow value through the extension of our specialty products and services. This could be new sectors like the plastic industry, and we implemented that new business unit about a year ago, new product, in this case, polymers, and in particular, polypropylene. And this could be in new geographies. It's quite a modest agenda at the moment, but we have started to sell a few products into New Zealand, and we have implemented a small entity in Papua Guinea to serve some mining customers. And we continue to expand customer services and solution offering. And that will become even more critical when we talk about the sustainable agenda for our customers. Number three, we'll continue our diversification through acquisition of adjacent businesses. We have done Liberty wholesale, Liberty Rural as we call them now, and you have the CEO of Liberty here in the audience. So I'm sure he would be absolutely passionate to tell you about this great business. We completed the acquisition of LyondellBasell Australia a year ago, and we complemented that actually last week with the acquisition of a very small business in advanced polymers. We also completed the acquisition of Skyfuel, a small specialized aviation business. And as mentioned by Jevan earlier, the OTR Group acquisition, pending obviously the regulatory approval, sorry, will bring a few wholesale businesses as well as for a total value of about $15 million to $20 million. Next slide, please. Sorry for presenting a slide that is so busy. But that's pretty much the summary of the beauty and the complexity of our C&I business. This is basically where we are playing and our product offering. We have developed over time a unique and diversified portfolio. Viva Energy participates in more segments and product than anyone in our country. By segment, we mean resources, which is mining, oil and gas, aviation, whether it's international, domestic, general aviation, special carriers like RFDS, Marine with the cruise industry, container shipping industry, coastal shipping, marinas, transport, with the commercial road transport, buses, rail, agriculture, industrial, construction, defense. Anything missing here? Aerospace may be. Not for long maybe. We'll talk about that probably in a few years. By product, we mean obviously, our traditional products. We are talking here diesel and jet, pure commodities of our business with two clear agendas here. One will continue to grow because these products are going to grow in the next few years. Mining is growing. Aviation is growing. Aviation has not even fully recovered versus pre-pandemic. There's still a lot of new routes to reopen in particular towards China. So this market will grow. And as we have started to mention, obviously, those products are probably more impacted by the future sustainable agenda. So we have a role to support transition to renewable and low-carbon fuels. So traditional commodities, then we have obviously our integrated specialties, for which we are the only manufacturer in Australia at our Geelong Refinery. That includes bitumen, polymers, as I mentioned before, chemicals with hydrocarbon solvent, special aviation product, Avgas/F-44, which is a military grade for aviation or some special marine fuels. Those lines of products are more resilient to the energy transition, and we have opportunities to extend to other markets. As I mentioned, we already started to sell small volume in New Zealand, and we want to do more of that. And then we have some extension. Lubricant, which is a line of business that is actually delivered in every single segment, any moving parts in the world needs lubrication. And we are the exclusive distributor of Shell lubricants in Australia. And over the last few years, we have developed a large range of services. That could be sales of equipment, that could be all condition monitoring, technical support, training, strategic storage into plane services, barge services, defueling into locomotive supply, terminal and asset management, carbon solutions, just to name a few. As you clearly understand, we love complexity. And this is not because I'm French. It is because this is what is generating value in our business. We have to be very aware of the cost to diversify our business, but this is where we are extracting the value from the market. So this diversified portfolio has proved very resilient during COVID and present further growth opportunities that reflect in our results in the last three years, and it's very, very hard to replicate. Scott mentioned earlier that our Specialty portfolio represents already close to 50% of our total earnings. That is a key asset for our future growth. Next slide, please, David. So I'm not going to spend too much time on this slide. You have it available in the pack for those who are not familiar with our business, you'll get a few more insights about some of the products and services that we just mentioned. We'll be happy to talk about that as well during lunch. Feel free to come to me, and I will be more than happy to tell a bit more secrets about this portfolio. Next slide, please. So it's great to operate in many sectors with an extensive portfolio of products and services. But obviously, we could not be successful without an extensive national coverage and presence. Developing a high-touch strategy means that we have to support our customers wherever they operate and whenever they need us. This is another area where we are building unique positions. Our business is a 24/7. You would be surprised about the number of deals negotiated at night in the marine industry in particular, where most of the brokers are based obviously in the U.S. or in Europe. So customers are calling us at 2:00 in the morning, and we are here to give them a call and to develop business with them. In aviation, we have some of our larger customers in the Middle East and their weekends are not necessarily our weekends. We are here to serve them any time. And that is what is making us very different in this market. We are directly present in 54 regional airports and can service our aviation customers in many more locations through local partnerships or acceptance of our fuel to [ sky card ]. Liberty Rural as present with depots and trucks in more than 40 rural locations. Our success in Marine relies on dedicated supply chains, in particular, for fuel oil, across Victoria and New South Wales through strategically located assets at Gore Bay and Geelong. That's very, very important to understand this national coverage to guarantee security of supply, which is of paramount importance for our customers. We sometimes need to keep in stock tens of millions of liters, in Marine, for example. But sometimes it's just 1 or 2 drums of fuel in a very remote locations for Royal Flying Doctors, for example, if they have to take care of a patient in the middle of nowhere in Australia, they need fuel to take care of that patient. This is our job. So strengthening positions in regional locations are definitely supporting earnings growth in the last few years. Next slide, David, please. So we talked about the diversified portfolio and the national coverage. It is more than time to mention our customers a bit more. We are very proud of our customers, and we believe in long-term strategic partnerships. I know everyone says that, but quickly we leave those words. Another key success factor of our C&I business is actually the high quality of our customer base. When I mentioned earlier the segments that we are targeting, I should have mentioned how the diverse industry exposure drives resilience and stability. Those industries are following different cycles. They are impacted in a different manner by the domestic economy or some international factors. Usually, if one sector is down, another will shine. And this is what is driving, again, stability and resilience of our business. And our customers are very loyal. Our top 50 customers comprised by 70% of our EBITDA with an average tenure of more than 15 years. We are dealing in a quite conservative industry. That's the reason why our performance to win more than 100 accounts in the last 3 years has been absolutely remarkable. Once we get the customer, we keep them. And again, 70% of our EBITDA is pretty safe with customers we have very, very long relationship with. This -- 2022 stats, by the way. So the number will change a bit because of the large number of customers that we have won in the last few years. But again, the core of the business is very stable and resilient. This is what I would like you to take away from that slide. Next slide, please. So we have seen how robust we believe our baseline is. Nevertheless, obviously, there is an obvious question. How sensitive is this to energy transition. It's fair to say that the pandemic has accelerated that agenda. And there is not a single discussion today with customers without a mention of energy transition and how we can support our valued customers on their journey to decarbonize their business. As I mentioned before, the specialty products are generally much less impacted by energy transition compared to our main fuel, diesel and jet. And I'm very sorry, and I have to apologize, again, it's going to be very boring. But here again, we are talking about diversification, diversification, diversification. Because it is indeed very unlikely that will be one clear technology winner in that space. So we are working on a large number of potential solutions for our customers in the future. You haven't screened a variety of solutions that we are exploring across the segments that we are serving. And this is not even an exhaustive list. You may have heard of methanol or ammonia, I don't think they're on the slide, but we are also exploring those opportunities. Just in the last year I have signed more than 50 confidentiality agreements with customers and potential partners in this area. So this is a very, very active topic for commercial. So what is ready? We have already available a number of carbon-neutral products certified by climate active. So we are talking jets, diesel, marine fuel petrol, solvents and bitumen. So this represents the immediate solution for some customers and some backup solution in the future because the number of application will be very hard to work on. We are working on the -- on a great number of initiatives. So just to name the probably the more active one at the moment, hydrogen and hopefully, you have heard about NESS, New Energy Service Station that we are building in Geelong, which I believe the biggest [ hydrolyzer ] certainly in the country. I think it's about to be delivered and Lachlan would be happy to comment on that. So hydrogen is definitely an area that we are very seriously exploring at the moment. We are working on a number of proofs and concept trials with sustainable aviation fuel and renewable diesel as well as blendable fuels, HVO, SAF or biodiesel. A number of other opportunities are considered as well, but they will certainly require more time. So I think two things that I would like you to take away here. The first one is Viva's. Viva Energy's is actively pursuing opportunities in each pathway. We are at the table for any discussion. And the second is a direct impact on commercial and industrial earnings. We believe that this impact is going to be very moderate in the next 5 years because it takes long to work on those projects. But this is nevertheless absolutely key for us to reinforce our support to our customers to have their transition to lower carbon fuels. In conclusion, we have developed a very strong baseline for our business with a clear track record of positive performance. We have a clear value-led strategy, well progressed that we want to execute perfectly, thanks to an extremely experienced team, driven by passion and sense of achievement. Our high-touch model is resilient hard to replicate, unique diversified portfolio, extensive national and regional coverage and a high-quality and loyal customer base. We are well positioned for energy transition, supporting our customers' journey to low carbon fuels across our industry exposure. We have identified a clear pathway to continue to grow and optimize our business organically and through selected acquisition, and we have started that journey. Because of all of that, our new aspiration is to deliver earnings for that business of about $500 million in 5 years and possibly before Jevan. No, that's a joke. Don't record that, please. So we'll be happy to answer questions later on. But actually, I have one for you. There is one area where C&I has not performed the best yet. We have convinced a lot of customers to give us their confidence, but we have not been able yet to convince you investors to value our business at a high multiple. So can somewhat help me there. So I would be more than happy to receive your comments and your piece of advice. Thank you very much for your attention, and I now hand over to Jen, our greater supporter.

Thank you. Good morning. My name is Jen Gray, and I'm going to cover our Energy and Infrastructure business, both the supply chain part, which is mine and on Dale's behalf, also our energy hub down at Geelong. So I might start with like everybody, you'll notice a theme, we've all got a transformation and growth strategy we'd like to share with you today. So David, if you might like to bring up that first slide. And as Scott mentioned this morning, really at the heart of our Energy & Infrastructure business is the Geelong Energy Hub. And this is a business that's already seen an enormous amount of change from the refining business we were running just 5 years ago and in part due to the work that was done with the government in 2021. It's still a business that is exposed to volatility of the global markets, but the introduction of the fuel security services payment or as we call it, the FSSP for obvious reasons, has materially derisked the downside of this refining business. It remains a very good business as last year's result demonstrated. And the fundamentals this year were favorable too, and it was unfortunate that we weren't able to take full advantage of them due to the challenged turnaround that we experienced. We do see this trend continuing into the next decade with sustained demand, supported by a robust outlook of regional refining margins, and we will explore that a bit more in later slides. Geelong has the capacity to produce more, particularly for Denis' business, when we talk about specialties such as bitumen, polymers, avgas, solvents, and indeed, new grades like F-44, which we've just commenced production of. I think the first barrel came off the line maybe only a week ago, which was a key capability when the defense force we're looking for a partner for their fuel supply. It also has -- Geelong also has a very important role to play in supply security. With the geopolitical climate becoming increasingly important, we've seen this through the legislation of minimum stock holdings, stockholding obligations and with the provision of grants to build additional storage, including some at Geelong. Our strong base business gives us time to work on our longer-term transition of [indiscernible] assets to support lower carbon and renewable fuels as these markets continue to develop. Next slide, Dave. So a bit of a deep dive into the Australian fuel market will take a closer look. And not surprisingly, we see fuel demand remaining robust through to the end of the decade. We do see some impact on our gasoline demand through EV penetration. But as Denis mentioned, the substitutions for our diesel and aviation fuels are not as clear. Strong demand fundamentals and energy security continue to support our local refining. Thanks, David. Next slide. Moving on now to have a look at our regional refining margin outlook. We do see that demand has recovered and will remain strong. So you can see a graph from FGE, predicting the Asia Pacific region will transition from a net importer of gasoline by the end of the decade, and the current diesel surplus will shrink within the same period. This general tightness in the supply balance and the forward view of elevated Singapore product cracks support the investments already underway at Geelong Refinery such as the strategic storage, ultra-low-sulfur gasoline and continued maintenance turnarounds and energy improvements. Thanks, David. Next slide, please. Moving on to our refining operating costs. So we have seen heightened operating costs in 2022 and 2023. But it is important that we recognize they were symptomatic of the specific environment in which we were operating. So in 2022, we certainly saw higher energy costs, but coupled with a strong margin environment that incentivized production, which resulted in additional exports of finished product. This year saw a major turnaround event that was -- which was impacted with unexpected delays, lower production and resulting increased shipping costs to support intermediates being exported and imports of replacement products impacted our unit operating costs. However, as we head into 2024, we do anticipate a clean year with a forecast cost base to normalize to about $8.50 per barrel. David, if I can have the next slide. Thank you. So we -- with that forecast operating cost of $8.50 per barrel, we will see Geelong deliver a mid-cycle refining EBITDA of between $200 million and $300 million in full production years with further upside of $55 million to $60 million for every additional dollar of gross refining margin that can be realized. In the longer term, we will see the safeguard mechanism increase unit operating costs, and we are estimating in the order of $0.20 to $0.40 per barrel. With electrification and energy efficiency projects available, we can mitigate this cost and close the gap. We should also remember that the FSSP continues to be in place and is protecting downside refining margins below $10.20 per barrel. Can I have the next slide, please. It would be remiss of me not to stand up here and mention our supply chain. And well Geelong Energy Hub is a core part of our Energy & Infrastructure business, we do have a significant footprint around the country. And what you need to do is overlay the graph Denis showed you earlier with all of the Liberty Rural depots and all of our regional airport infrastructure onto this chart. We remain one of the few companies that boast a truly national footprint close to its customers, and it materially supporting our Retail and Commercial businesses. Together, with the benefits of our supplier partnership with Vitol, this is truly an enviable position and it remains just as relevant as we transition to low carbon and renewable fuels. Next slide, please. Thank you. As I touched on earlier, Energy Security continues to be an issue of heightened interest in an increasingly volatile geopolitical climate. As an Australian company, Viva is well positioned to play a role in energy security, and this has already been evidenced through our continued commitment to local manufacturing, including investment and upgrades to deliver the new ultra-low sulfur, gasoline and aromatic specifications, the securing of government grants that have supported the construction of 90 million liters of additional storage at Geelong. Our partnership with defense that not only see supply their fuel but also manufacture bespoke military grades like F-44 at Geelong, and the proposed gas import terminal, which will help make Victoria's growing gas shortage. Next slide, please. We believe that our existing capability at Geelong will be required well into the next decade to support the energy transition, after which repurposing could be considered. In the meantime, coprocessing of waste feedstocks, recycled plastics to produce lower carbon fuels and support the energy transition as being explored. It could be complemented by the import and blending of renewable fuels to make this growing demand with future opportunity to grow dedicated processing of fuels and recycled products from waste plastics and renewable feedstocks. Next slide, please. Thank you. There are lots of words on this slide. But what I'm really trying to say is that there is a pathway to deliver lower carbon fuels and renewable fuels, leveraging our existing asset base. We began small-scale coprocessing in Geelong in the coming months and which will help us build our knowledge and capability in this area. And we're already exploring ways to set our supply chains to support drop-in renewable alternatives like SAF and HVO. For every 1 of those 50 NDAs that Denis has signed, we've had a request to get a product in for that customer trial. As we move towards renewable fuels, there are a range of pathways we can explore, all of which need to be supported by security of feedstock, customer appetite, mostly to pay for them and the appropriate policy frameworks. Our assets have a role to play, not only in delivering a smooth energy transition, but also and the supply and distribution of lower carbon and renewable fuels. These different pathways will require different levels of investment and risk appetite, but with a robust refining outlook, we're well into the next decade, we have time to learn, grow our capability and decide how we will grow in this space. Next slide, please. So in conclusion, General tightness in the refining supply-demand balance makes it an attractive business, and we expect it to make a material contribution well into the next decade. It will provide security of supply and give us time to build our capability in the production and distribution of lower carbon and renewable fuels. Thank you Carolyn?

Okay. Thank you, Jen. So now I'll talk about some financial highlights. And today, I'm going to primarily focus on our updated capital management framework and talk about our medium-term CapEx plans as well as talk about 2024 CapEx guidance. Obviously, this will be in the context of our growing business that we've been talking about today. So if we start on this slide, just between this slide and the next slide, this reflects our refreshed capital management framework. It's quite similar to the 2021 version that you may recall. And it hasn't changed hugely because that was robust and fit for purpose, but we have made some updates to reflect our increasingly divergent and evolving three businesses. So as expected, the framework continues to focus on appropriately sustaining and, of course, growing our operations, maintaining our consistently strong balance sheet, I'd call that strong mark, and providing great shareholder returns. And just as a reminder, we paid out 70% of NPAT at the end of '22 and for the say the commercial and Convenience and Mobility businesses at the end of H1, which is the top of our dividend range. In terms of the key updates to this framework, we're really shifting our focus in growth investment towards earnings diversification. And I'm sure that will have been really clear from the discussions that we've had this morning, not just within the Convenience and Mobility and Commercial and Industrial, but also the Energy and Infrastructure areas as well. We've also called out energy efficiency and emissions reduction investment is key to sustaining our business, but also as you've heard, for example, Jevan was giving some examples earlier of some of the LED and solar, that will reduce some of the costs as well. We go to the next slide, David. I'll talk about growth a little bit now. So we've obviously got a range of opportunities to invest in growth that you've heard about. And we've -- within our framework, we've bucketed them into three different areas: earnings diversification, traditional energy. So for example, some fuel infrastructure and energy transition. So we've heard a lot about coprocessing, hydrogen EVs. Denis' slide was very clear that there are a lot of opportunities for energy transition investment. So our focus is really rebalancing our growth investment towards earnings diversification. That's obviously to grow our long-term earnings base. So we have returns criteria set for the different types of growth investment. As you can imagine, for earnings diversification and traditional energy, we're going to require above WACC returns, and Jevan gave some examples of what we're expecting from the OTR growth CapEx. And of course, we're going to be looking for synergies and leveraging our strengths. So Denis talked a lot about our customer relationships, and Jen talked a lot about our networks as well. So we've got a lot to leverage there. I mean it's really important that we have targeted investment in energy transition. So we talked there are a lot of opportunities there. So we've got to make sure that we're targeted and measured, but we also have to be realistic that as we invest in these energy transition areas, which we have to, as Denis said, to support our customers to shore up our longer-term future that we need to expect good returns in the future, but accept lower returns in the early years. So if we go to the next slide. So this slide has a number of components. So I'll call out a few key highlights. It does talk about the different types of CapEx within our profile. And on the left-hand side, you'll see our expected medium-term CapEx profile as well. So the key callouts, our ongoing total CapEx range for our growing business, we expect to be $350 million to $450 million a year from 2025. So we call out 2025 because 2024 will be a higher CapEx year. We'll talk about the guidance in a minute. And that's because the bulk of the remaining CapEx that we call compliance CapEx spend will happen within this year. And Jen talked briefly to the ultra-low-sulfur gasoline aromatics and strategic storage, so we'll be incurring the bulk of those costs in '24. Sustaining CapEx will plan to be smooth across the year. So we'll see -- expecting to see less lumpy CapEx for sustaining CapEx, including in use of major turnarounds. So the next major turnaround is in 2025, and we expect a range of $250 million to $300 million per year. We talked a lot about growth. Obviously, the net $50 million OTR CapEx is up there. I won't labor on that one again. We've talked about that a lot. And you can see on the left-hand side, that CapEx forecast profile is going to be weighted more towards convenience and mobility and commercial and industrial in the future. So this profile on the left does include OTR as do these bars. So if we move to the next slide, David. So this is a CapEx summary where we've -- obviously, we're confirming our guidance for 2023 for CapEx, and we're providing 2024 guidance. So 2023 CapEx remains unchanged. The small change you'll notice is that we've split out the CapEx between convenience and mobility and commercial and industrial previously, we grouped them. And our CapEx guidance for 2024, we've bucketed in 2 ways between growth sustaining and compliance categories as well as the usual categories that you can see lined up against 2023. It's really important to note for the 2024 guidance that this excludes OTR. We don't know exactly when that's going to complete. But when it does, we'll bring in the appropriate prorated CapEx guidance for OTR. As a reminder, we've talked about net $50 million growth to start per annum. And in previous disclosures, we talked to $10 million to $15 million per annum in sustaining. Move to the next slide. So I want to talk about cash now, our strong track record of cash generating -- generation from the nonrefining businesses. I know Denis talked about his massive cash generation, but let's not forget that convenience and mobility also generated a lot of cash for us, too. We -- clearly, we've gone back to 2018 to share as a reminder that we do have a really strong track record of converting EBITDA to free cash flows in our convenience and mobility and commercial and industrial businesses. And in total, the free cash flow from those businesses is about $1.3 billion since 2018. So next slide. Finally, again, a busy slide, a bit more information for you to digest separately. Really, in summary, I just want to conclude, we've shared that our approach to capital management really focuses on balancing utilization of our strong free cash flow generation to grow and sustain our 3 businesses, ensure we maintain the strong balance sheet and remain within our target gearing ratio and, of course, provide excellent returns to our shareholders. Thank you. Over to Scott to close.

Thanks, Carolyn. So we've got plenty of time for questions. I'll come back at the end to wrap up before lunch. So -- and you've got the whole exec team here, so feel free to cover whatever subject you like. Adam, I think you were first.

I'm Adam Martin, E&P. Just a question, Carolyn, just on the balance sheet. 1 to 1.5 leverage hasn't changed. Just wondering -- can you get a bit more aggressive here in the next couple of years about lifting that? And sort of if so, when might you do that? Obviously, you've got a fair bit of CapEx coming as well, and you've got the OTR transaction, but perhaps you could talk through that.

Yes, absolutely. Thank you. And it's a great question. It's one that we continuously challenge ourselves on. We feel like at this juncture, it's helpful to stay within that range. It certainly worked for us. I know we'll be taking on more -- we'll be taking on some term debt. So as -- because we're taking on term debt for the first time, just a reminder that our gearing range is just term debt to EBITDA doesn't include our revolving credit facility. So we think to start with that, this is a good place to start, and then we'll build on our EBITDA profile and think about it at that time.

Okay. And second question, just for Denis. Look, really good commercial performance last 3, 4 years. I mean the message coming from Viva the last 3 or 4 months is there's some one-offs in that first half number. Can you just talk through a bit about how you're feeling? Because it looks like the third quarter for commercial is still pretty good, but just give us a bit more color -- a bit more granularity about that, please.

Yes, Adam, thank you for the question. The benefits we were talking about was largely driven by the volatile environment we're facing, which obviously gives us a few opportunities we talked about in our relation with Viva that is giving us, know the opportunity to take advantage of this volatility. When we released the results for the first half, we're talking about an extraordinary environment in the first half for us to deliver those advantages. We thought this would normalize over time. And current time is proving us a bit wrong, to be honest. We already had war in Ukraine, but since then obviously, new environment in Israel and with the proximity of Iran is probably bringing more volatility in the market. If you look at just the product premia, in the last 2 months, it's absolutely all over the place. It's going up and down by more than 30%. So we definitely do not want to speculate on that, but we believe we can anticipate the market to take advantage of this environment a bit longer. I cannot give you the magnitude of that.

I think Dale -- I might just go to Dale, and then you, David.

Denis, just I guess, on that earnings outlook then, we're running at about $450 million annualized in the first half. And then you've got the defense force contract and you've got OTR commercial coming on top as well, which makes it look like you have $500 million target, you could get there pretty quickly, not in 5 years and it's not too heroic to get there. Firstly, just I was wondering sort of how you're thinking about that trajectory of the -- how long it takes you to get to your $500 million of EBITDA? And are there any other buckets in there apart from the 2 that I've called out?

Yes. Thank you for the question. As I mentioned, our first objective is to get to $500 million before Jevan gets there. So before 5 years, but that's our aspiration. It's important that we want to deliver that in a sustainable manner. We don't want a spike of performance of $500 million. That may happen because of a very, very favorable environment. We want this business to be a structurally a $500 million EBITDA business. So you have mentioned indeed a few new wins. Fair to say with the success we had in the last 3 years, we have a big target on our back. And certainly, we expect the competition to react. So we have a challenge actually to retain the businesses that we have developed during this period of time, but we believe we have a very, very strong baseline, as I mentioned, to get to this $500 million as soon as we can. Certainly, our acquisition pipeline will help that and will help us to get a sustainable $0.5 billion business in the future. I believe we are well on track.

So I don't know if I should direct this question to you or Scott. Scott, you previously said it was a defendable business of $350 million of EBITDA. We're well above that and heading higher now. So where do you see the business as we stand today is a defendable earnings level? And how much of that $500 million target, are you actually chasing -- like are you at $400 million trying to get to $500 million and then how much of that is coming from the $50 million to $100 million of CapEx per annum that's going into the -- or I assume it was for this business in the other slide? Like how much is coming from M&A and acquisitions versus organic?

Yes. Look, I think perhaps [indiscernible] can try to answer your question is that we've obviously had -- we've had some great results from the work we've done to reset the business coming out of the pandemic, and we're quite deliberate about taking up -- if there is an opportunity through a pandemic and losing significant chances of your business for a period of time, that was important. . That was an opportunity that we chose to go after, and it's delivered some great results underpinned by some exceptional circumstances and obviously some -- as Denis pointed out, some decisions we talk around procurement with Vitol which have really helped us through that time. But I think also underpinned by a level of stability in our commercial business over -- through the pandemic to maintain strong support of our customers in commercial and continue to represent to customers that we have targeted, and that's paid a lot of dividends because there to support people through some -- our customers through some difficult times and demonstrate reliability. So all of that is providing the uplift that you're seeing. Well, I guess what we want to be known for in commercial is to be dependable, ratable, reliable earning business. And I guess what we are conscious of is that we are operating at a time where enter a period where every sector that we service in commercial is performing well. So it's not -- Denis talks about the diversity is the strength of the commercial because that diversity allows us to weather sectorial changes. And when some sectors are performing poorly, others that tend to be performing high and that provides a level of ratability. But we are in this unique time, have been for a couple of years despite economic headwinds that commercial businesses in Australia that we service are all performing extremely well at the same time, and that's also a component of the uplift that we're seeing in commercial. Now I don't think we can necessarily rely on that continuing forever. We are heading into some more difficult times for the next couple of years. And so things will -- you can expect things to moderate a little bit, maybe even come off a bit from the performances that we're seeing in the first half of this year. And I think it's sort of sensible to accept that and -- but also know that your commercial business is diverse enough that we can work through that and still deliver good returns through that period. So -- that means -- and I think we can expect to still see good -- a new baseline for commercial and -- but recognizing it might be a little bit more challenging for the next couple of years and it has been for the last couple of years. To continue to maintain momentum and continue to diversify the business and hit that $500 million on a sustainable basis, we think we will require a few more bolt-on acquisitions. We haven't banked on any significant acquisitions to get to that $500 million. I think the small, modest bolt-ons that we've done to actually delivered well for us. We've got one, as Denis pointed out, coming up, which is the commercial part of the OTR group that we got -- that we're acquiring that will sit within Bill's portfolio. That's a good example. It's a $15-plus million EBITDA contribution to commercial. A few more of those will get us, I believe, to a sustainable $500 million-plus business, and it will be a combination of both organic and acquisitions, I think, to get us there. So I know I haven't completely given you a number, but I think that's the sort of storyline [indiscernible] behind just the results and where we're trying to head into and just to be a little bit conservative in recognizing the environment we're trading into at the moment. David?

This is probably answering Denis' question that he asked us, and I don't want to speak for others in the room, but the reason why people like me, as an example, don't value that business as highly as probably should is because listening to all your answers to that, I can hear it, but I still haven't quite, quite understood how you've been able to expand your competitive advantage in the -- effectively the commercial type business. And the perception is, I suppose, to the commercial business is it's a very low margin, highly competitive business that if you win customers at the expense of others, you're going to get, as you say, put a target on your back and they're going to come after you. So my first question is -- and then I want to ask Jennifer and Dale, the questions because the second part is that we like earnings stability. And you put the chart up where refining is $250 million, as you target that it's been anything but it's been up and down like a roller coaster and large part of that's been self-controlled issues, production difficulties, costs, et cetera. So I'm trying to understand how much your business has fundamentally improved that we as investors can put a higher multiple on that business? How much is you -- what have you done? Can you give us some basic things that we can write in our notes and tell our sales desk that this business has improved other than not being rude, motherhood statements about being more diverse, being more reliable. Can you give us a little bit of sugar as to how this volatility has worked in your favor, so as we can actually pin how this business is a defendable business against pretty hot competitors...

Yes. I mean, I hear you. I think the most important thing -- the most important thing is clearly the results, right? And I think we've delivered a very strong result last year barring the production challenges we had at July this year, the fundamentals are there to support a very strong result in refining on top of what you can see from the first half results, very strong results in retail and commercial as well. So we've already -- I think we've got now finished this year with a couple of years under our belt of good consistent performance across all parts of the business. And to Dale's question, a more sustainable re-rated commercial business moving forward. We have to continue to back that up. And the part of today is to demonstrate the plans and investments we've already made and achievements we've already achieved as well to continue to maintain the momentum on earnings and growth. I think your point on refining -- so I look at that chart again this morning, it's unfortunately that we've put that chart up because the world has changed materially since 2021 for refining. And of course, that chart goes back further than that, and it was a very choppy period, and that underscores the importance of the right deal that we have struck with the Australian government around removing the downside volatility and leaving, obviously, the upside volatility to our benefit, which we saw clearly last year. And the outlook that Jen pointed to is the outlook we saw when we made that commitment to continue refining through the rest of the decade because we do believe that the fundamentals are there to continue to support a stronger period for refining than perhaps the last 10 years. So you kind of got to look at it from that new position because it's a fundamentally different business now moving forward. So, I think the track record is there, I think the plans are there to deliver on. We've obviously now got to go and deliver on those plans. And I think that's -- I don't think, to your point, a significant piece of work we've got to do. But I think we've got the capability and the acquisitions that we've made were to actually go and deliver on that. We're not trying to deliver on those plans without a proven track record because we've acquired that track record in the case of retail, and we've obviously -- we obviously got now a couple of years of track record in commercial and refining can deliver the same. So I think the -- I think it's all there, David. It's...

I still haven't quite got the answer yet because Denis put the chart up that 100% of his earnings comes from contracts more than 6 years old. Now I know that if someone took a contract off me, I go bloody hard to go back and get that contract off them, and that would bring the whole market down...

Well, I think the point for commercial, though, you've got to remember is that half of the business -- half of the earnings that Denis has in this portfolio, we don't compete with the competitors that you're probably thinking of, [indiscernible] is a completely different competitor set than most of those other segments. We are the only manufacturer of all those specialties that Denis glossed over this slide when you got to -- if you go through each of the -- the slide that sets out the specialist business, like we are the only manufacturer in Australia, and so the competitors that we do compete with those segments are not in traditional oil company competitors. So I think there's some really unique differences in our commercial business that makes it quite defendable. And we obviously -- I think we have delivered and continuously opportunities to grow those and add to those segments, and that will continue to make us -- we'll continue to differentiate us and set us on a different trajectory in that part of the business.

And maybe, David, I would give you maybe a few more insights. I'm going to give you an anecdote. I was -- 4 months ago, I was in the U.S. to review the contract performance with the customer. So they gave us the scorecard, there are about 30 criteria. Every single line was green, except one was orange and the feedback we got from this customer, we were the only supplier, not only in Australia, in the world to receive, A rating. We're the only one, only one in the world. And then I was questioning so what is this orange line. I want to see green everywhere. They say, no, the orange line is price and that's okay. We don't want to be the cheapest. And behind this anecdote, I think -- and I hate to say that, but I think COVID has been a blessing for us because we have really differentiated with a number of customers. And a number of customers have realized how important it is to work with a partner that can do more for them. We have seen a number of customers that used to be very transactional that have changed their behaviors and that is driving value. So not only, obviously, we have gained new customers, but we are extracting more value from our existing customer base because they are prepared to recognize what is the price to pay to receive a certain level of service. I'm going to give you another anecdote. When Virgin went into administration, we had that discussion with Virgin. We were obviously on the phone with them pretty much all night. Office administration was at 9:00. We supply their first plane under a new account under administration at 9:15. We have delayed. We were -- at that time, we were resuming more than 600 planes per day in Australia. We have delayed one plane by 20 minutes in Perth. That's all. People remember that. We are giving on-time performance that has no equivalent in the market. When I'm talking about the complexity, I was talking about into locomotive supply now that we are doing this in collaboration with Liberty. Not a lot of people can do that. And obviously, there is a cost. And if you are reliable to do that, people are prepared to pay a premium and they are probably prepared to pay a premium now much more compared to pre-COVID and I think this is a very big difference. And then indeed, because we have this national presence when we're talking [indiscernible] we need to be present in so many locations. Not many people that are capable to do that. I tried during my presentation to highlight all the aspects that are making our business different. And there is something that is, I know a bit intangible. And that's the reason why I was giving the example of the 2,000 years of experience that we have in our team, it's quite unique. We are the only one to give that to the market. And there is a value for that. People understand that. And they definitely understand that much more than they understood before COVID. So the momentum have changed. And in the same way, they are prepared to pay a premium working with us because they believe we are the right partner for their decarbonization agenda, which today is delivering 0 additional earnings, but we have to pay for those -- all those efforts. And I think customers have realized that. And -- that's the reason why I'm talking about trusted adviser and not a supplier because when you're just a supplier, yes, indeed the only thing that you can talk about is about price, in particular, in the commodity business. And I think our success has been on the diversification of our portfolio, but our capability to extract more value, including for commodities. That's very important. And to that extent, COVID has helped us to set us apart.

David, did we convince you at all?

Yes, I think so.

Okay. Good effort. Michael.

Michael from Jefferies. You've given us an earnings target for 5 years for convenience as well as for the commercial business. On Energy & Infrastructure, you've talked to the mid-cycle earnings from refining, but there are other parts to that division as well. So you've got the gas import terminals strategic storage, et cetera. How should we think about potential upside opportunity for that division and bearing in mind that, that through-the-cycle number will move around a little bit?

Yes. I mean today, yes, it's clearly the bigger earning which an energy infrastructure is refining and that's clearly what ultimately generates -- drives all the earnings in there. The supply chain and the ability to service all the customers that Denis just talked about in our retail business is an important value contribution as well because we've out that national position and the advantaged positions we have around the country, obviously, affects our procurement capability. So that's embedded a bit in the E&I in a bit in the other 2 businesses as well. I guess what we're trying to do longer term discontinued a bit like we're doing in the other businesses is to continue to look to have waste we can diversify earnings in the E&I portfolio. The gas terminal was a good example of a project that could do that, leveraging the capability we have in E&I in terms of both location [indiscernible] ability to run, will build and run large-scale facilities like LNG, Terminal 1 and support commercial customers, if you like, as well. So it's kind of consistent with the sort of capability we have. But potentially, if that project can come to pass, we'll generate earnings in its own right and continue to build on the earnings. That's a bit for the future. I think in terms of where we're at with 3 businesses is the one that I think we've got -- we've transformed that business in the last couple of years. We haven't yet built what's the diversification -- the real earnings diversification opportunity, and that would be project dependent as we move forward. We still believe on the gas terminal that it's a great project. It's going to be needed by Victoria. Victoria continues no matter what you think about gas demand is definitely going and heading into a really tight type period and additional supply is needed. It clearly makes sense -- it's the biggest gas market in Australia. It clearly makes sense to bring gas directly into the market rather than trying to distribute gas from New South Wales or South Australia back into Victoria. So fundamentally, it's the most competitive and most compelling project. We just obviously have a bit more work to do with the Victorian processes around getting an EES approval, which is taking a bit longer than we'd hoped for, but we're still pursuing that and hope to have that project ready at the back end of next year that would be a good example of a diversification project. Longer term, as Jen talked about, and I sort of mentioned in my intro, I think lower carbon fuels is a real -- is going to be needed by Australia to meet emissions reduction target. There's certainly been recognized in places like Europe and California and is well advanced there as being a big part of the energy transition. We believe it will come to Australia at some point. We want to be ready for that, and it will extend the life of all of those infrastructure assets that we have in our portfolio at the moment and provide revenue opportunities for a long time to come.

Okay. And my second question is on the Vitol supply agreement, sort of going back to the time of the IPO, there was a lot of investor skepticism around -- you've extended the procurement fee waiver. Can you give us some indication of how the agreement that you've got would compare to what a market type agreement would be if at some point, that agreement was either benchmark to market or you'd need to tender out to the market?

Yes. I mean, I think there is no real market comparison, if you like, because I think without this agreement, we would probably be having to look at setting up our own trading position in Singapore. And I mean we have a small position there as well. We have a small team there that works and manages the Vitol relationship and gives us more deep insight into what's happening in the market, so that they always could manage that sensibly. Without that agreement that we have in place with Vitol, we really would be compelled to setting up our own capability in the way that others have had to do as well. It's not as simple as just going to, I don't know, a Shell or a major refinery in the region and doing a supply agreement. You need to have capability to buy from multiple sources to have the resilience and capability and your supply chain to meet the needs of your customers. So that's the part we haven't had to go down. So it's a whole investment and capability we haven't had to make. At times, it means there's a potential margin in that supply chain that we're not accessing because obviously, there's a trading margin there. But at the same time, it very much derisks the business that we operate in Australia and have served us particularly well in the last couple of years as [indiscernible] in the results that certainly in commercial. So look, it's -- it's not one that we've obviously had to think about too much because we focus on how we manage that relationship and getting the best outcomes for the business. It's serving us well. And the fact that it's continuing and has a lot of life estimate is actually, I think, a good thing for the business because it allows us then to focus on where we do want to grow, which is in a lot of the diversification areas that we've discussed today as opposed to us trying to continue to build scale to support our fuels business because, yes, that's not -- that's really not our core strategy, right? Our core strategy not to focus so much on scale, but focus more on value and diversification. And I think that's evident in the strategies that we've outlined today.

Okay. And just the last one on that. The procurement fee waiver, how does that work? Is there a prescribed fee per barrel or some other unit that is set and waived? Or is that a discussion that happens when that waive is extended?

It's discussion happens within the -- so it is by mutual agreement that if one is to be introduced at some point in time. So I think the reality is that this is an important relationship for Vitol even without the shareholding or a lower shareholding we'll have to tie this relationship with our business in Australia. This is important to them. It's important to us. So there's kind of a lot of mutual advantage, which will ultimately play out and how that gets negotiated if indeed it comes into play. But it will be -- I think it's going to be a relatively modest fee, which is immaterial to our business if one does actually get introduced at some point in time. So...

Scott Ryall, again. Sorry, I'm moved. Denis, I think any time I've heard a divisional head joke about funding someone else's business, it tends to be that, that business is perceived as lower growth, not needing the incremental capital. So I don't want to stop you making jokes because it was very entertaining, and I love it when you have a crack at your fellow divisional heads. But I was wondering if Scott and Carolyn, maybe you can comment on how you are seeing and making judgments on capital allocation between the divisions, please? Obviously, there's a benchmark, but do you see it as easier to give Jevan money at the moment for expansion as opposed to Denis there. Is that just as the opportunities have come up and talk about some of the characteristics you're considering between the divisions and how you're doing that?

Well, I guess, in terms of -- you're talking in terms of growth CapEx, so I guess...

Assuming same business, you want to stay in business.

Yes, yes, certainly do. So I mean say broadly, Denis' area is from a growth perspective, capital light. So I'm not going to share it with you, but I'm looking at the forecast CapEx here. And because we've already got obviously very well developed infrastructure that Denis relies on through the supply chain. There are incremental bits of CapEx that we have to invest to be able to say, support the Australian Defense Force with the new contract or go into a new aviation site, but they're relatively small bits of CapEx. So it's still important, of course, that absolutely, there's a return, but it isn't a very, very heavy draw. So I mean, from Jevan's perspective, he's got from an absolute dollar perspective, there is a heavier drawer, I guess, on the CapEx within his business. So yes, absolutely, he needs to demonstrate a very high return in order to compete and get that CapEx.

Okay. And acquisitions, would you say anything different for acquisitions given they are a bit more capital intense?

In terms of the returns that we would expect.

Just how you're thinking about the comparison between the 2 businesses?

Yes. So I mean, obviously, Jevan's got his hands full with an acquisition at the moment. So from a commercial perspective, we would be looking at something from a -- if we're talking strategic fit, some kind of adjacency that would be able to leverage the existing network. So there's, of course, that criteria as well. But certainly, from a -- if we're looking at acquisition, we will always be looking at EPS accretive. Obviously, we're looking at return on capital employed is not going to -- it's going to be higher than our WACC, all these sorts of important factors we take into consideration.

Tom from UBS.

Denis, I was wondering if you could comment in a bit more detail on how you see the supply chain or market evolving for SAF and renewable diesel in Australia. How significant levers contribution could be perhaps an indicative cost to build that capacity here?

I think this is a $50 million question.

Bigger than that.

It's bigger than that.

Probably even more that. Very much...

Just a question for you as well. This -- I guess is the supply chain, and then there's producing SAF. So maybe there's a distinction there as well.

Maybe it might be useful to just give Dale a bit of option to talk about the near-term work we are doing on coprocessing and what that represents. I think that's a low capital first entry into this market and then perhaps then hand over to Lachlan to talk about what dedicated processing might look like.

Okay. Thank you very much. Certainly, early days. It would be perhaps a best way to describe the environment here in Australia. But we do have capability at the refinery, both in terms of physical assets we have, but most importantly, our human assets as well. So we've got 2 projects that are underway. One is in the circular economy for plastics. So with our cat cracker, we've got the capability to process it what is currently available in, I would say, small volumes, but it does allow us to, one, develop the upstream supply chain, process it through our existing capabilities and to -- and then identify some of our products as containing that recycled material to see what polar is from a customer perspective. On the -- I'll call it, the coprocessing side as well, again, taking advantage of the assets that we've got available, both in terms of downstream capabilities with hydroprocessing. And that project is much a logistics project as anything, right? Again, with the small volumes that are available. You have to truck it to the refinery, put it in a heated tank and then we've got then the capability to inject it into the feeds from some of our hydrotreating processes. Again, being able to understand and develop the upstream supply, how we'll process it through our plant and relatively modest scale at this point and then be able to offer it to the market to see in Denis part of the business, in particular, who will respond and ultimately, how much may be willing to pay for it. So I'd like to refer to it as launch and learn. And with the scale of the projects that we're doing right now, they're modest in terms of demand on capital, but the intellectual property and intellectual type capabilities that we'll get through those 2 projects are very exciting for us.

Yes. And I think just to add to that, I think they don't underestimate the importance of projects like this in terms of the engagement with customers on helping them think about their energy transition. The hydrogen refueling facilities also in that category as well. It's not going to generate any significant returns. It will be cash positive, but it won't -- it's not going to be material earner for some time, but the leverage it gives us with customers to that are really interested in exploring that technology as part of their energy transition pathway is absolutely key. And that's a good example of how we continue to deepen and sustain strong relationships with customers by supporting them in some of these areas. So it's all part of early investment for a longer-term outlook that we see in these areas. But maybe I could just to talk about the longer-term plans.

Yes. So I guess that's what we really call internally a bit sort of stage 1 projects for the next 12 to 18 months of what we're looking to do to build up capability. When you move to a bit more medium term and think about dedicated processing at a larger scale, it is obviously more challenging and higher CapEx and more difficult. I think we would say in some of these renewable waste feedstocks, there's actually some attraction to that because we can see the commerciality of that. So that's in plastics and tires and the like. There's a lot to work through in that space, but we can see that there's markets for that and markets that will value it. In renewable diesel and SAF production, we feel like we're probably the best placed in terms of capability to bring that into the country. You're using very similar capability to what we currently have. And being able to use existing facilities also gives us some leg up and sort of getting going as opposed to building them from scrap -- excuse me, from scratch. So we feel like we're in a good space, but in that market, it is still the reality that those products are quite significantly more expensive than their comparators, diesel and jet. And so there's not really a mechanism in the market that is seeing a large uptake of those products, which we touched on a little bit earlier about our forward forecast of the Australian market. So we're seeing some imports at the moment. We're participating in some imports as we talked about, we would expect to see that to grow first. The benefits of renewable diesel is that it can be stored and transported through the same infrastructure. So in terms of where you're likely to see that happen, it makes the most sense to use existing infrastructure to deliver that, which really gives us an advantage in terms of being an early participant in that market. So we are doing a lot of work on these projects. And as Denis said, it's very important, we're very active in all of these. And you might see some more announcements from us in that space. But we do see those large-scale processing renewable diesel and SAF a bit further down the track.

And maybe I can comment a bit more on that to give a bit of color on my comment. When I said that we were expecting a very moderate impact on our earnings in the next 5 years, at least. It's just about that. Manufacturing is obviously one thing. And just for SAF, so your question was on SAF. There are a number of projects polishing everywhere. So we're talking several hundred millions of dollars to probably something like 50 million liters of SAF. Jet market in Australia is about $9 billion. If you want to offset 50% of that, you would need 4 billion liters of SAF and you're talking about that kind of investment. And although the investment basically come to a price of SAF that is about 3x the price of current kerosene. So unless there is a complete move of the entire industry, that's going to take long because obviously, no one is going to use SAF and certainly becoming completely uncompetitive because obviously, our products represent a nice portion of the total expense of our customers. So I think the large scale projects indeed will take time. I think what is also very important to insist on the access to feedstock and the governance to make sure you have access to the right feedstock. And to that extent, I think our relation with Vitol will be a key asset, again, because Vitol as a scale and Vitol as a capability and has already started to work on that. And we have already started some discussions, 3 parties discussion, including the customer, Vitol and ourselves because they know that. Manufacturing, they will be definitely manufacturing at some point in Australia, what can scale and when, that's really a question mark. It's too early to call. I think at the moment, it's really about access and governance on feedstock and then getting the right discussion with customers and what the industry is going to do. We have a number of customers saying, yes, we are prepared, but actually, we are prepared to do that in Europe because there is a mandate or in the U.S. because there's a subsidy. And Australia is at the bottom of our lease because the political framework is not even decided yet. Obviously, that can change very, very quickly. The reality for those big projects around SAF in particular, I think that will take a bit of time before we can see some scalable projects in place in Australia.

Being a very long answer to your question. I was just going to touch on that last bit as well. A lot of our work is also in that regulatory space. We don't see the uptake being able to grow without supportive regulations. And you can see that across the globe. There's no market where it's grown without a regulatory environment that effectively incentivizes the demand side as well as incentivizing building facilities and the production. So we need that -- that needs to happen before. I think Australia will see meaningful uptake.

No, that's helpful. I'm trying to understand how you'll think about allocating capital into those opportunities, given that there's no real defined return hurdle there. But I think your comments got also around the leverage to customers and helping make those key customers stickier and where they've got key interest in these opportunities makes sense.

Yes. So I mean I think the transition, I think, was on one of Jen's slides, but a little bit of modest capital next year gets us into coprocessing. It's not immaterial. It's like 50,000 tonnes we can process. It's probably the equivalent of 60 million liters of low carbon fuel that we produce. So from that. That gets us in the game, gives us something to engage with customers on supply. Certainly, there's plenty of customers really interested in being involved in it. That's small capital. The sort of more dedicated processing would be much more significant, but we wouldn't be looking to do that until after we've completed the work we've got in front of us at a long around compliance and getting through the low sulfur, and that gets us through to 2026, really. And it'll probably take all of that time and more so to get the regulatory framework to support investment like that as well as all the feedstocks that you need -- you're not going to build a plant like that if you haven't got your feedstock locked away. So there's a lot of things that have to be true for that to work. So it's more longer-term transition for the refining business, I think. So we've got one here as well with Rob.

Just maybe drilling into another segment of commercial markets, diesel for the mining industry. A lot of the mining industry have corporate promises to decarbonize, a lot of the other energy providers out there talk about massive opportunities to replace diesel. I'm just wondering, is that a space you guys are going to get into or are already into -- excuse me ignorance or how you think about that?

Do you want to just touch on the customer end, Denis, and then maybe you could wrap up from the...

Rob, definitely I have started discussion with customers quite a while ago. If you're talking about big miners, I think there are 3 areas, you have power generation, then you have process plant and then you have your mobile equipment. Certainly, where they will decarbonize their business versus certainly on power generation, and they have started to do that in a number of areas for all the mobile equipment, in particular any excavation type of equipment that's going to be more difficult. But we are working with them. We are working with them in relation of OEMs as well because obviously, if you don't have the relation with OEMs, it can be difficult to deliver the right solution. So yes, the mining has been pretty active. I think BHP has been pretty vocal about their program. And yes, we have discussion in the mining industry about that as well.

I was going to add is, it really is the same story in terms of what the decarbonization solution is, it is diesel replacement, and that is renewable diesel in the short to medium term, I think that you will see some electrification as well. And that is actually an opportunity for us as an extension of the EV charging work. So it is a challenge. They do very large volumes of diesel. And so we -- that is -- I think where we'll see some opportunity in terms of the import markets in terms of early-stage moving. And of course, we do also offer carbon offset fuels now. Everyone wants a direct solution, but we also need interim solutions and we're fully certified with climate active for providing offset diesel and so we can provide that to the market right now.

Okay. Great. And then I guess I kind of asked this question of all the energy companies that I talked to don't feel singled out. But are you -- is there a way for you guys to make money out of efficiency working with your customers to use less of your product?

This is the first discussion we have. And I've been in this industry for 35 years now. And the best way to decarbonize your business is actually to consume less first. So we are working -- we're talking about the mining industry. We have been working with the mining industry probably 10 years on some special additized diesel that would lower the consumption. Sometimes you're talking about 3%, 4% consumption reduction, which obviously on a big number means something that is definitely material and that we can work on. So yes, definitely. And not only because we are talking about carbon emission in the mining industry, we are talking a lot about reduction of any emissions, including NOx and so in particular for underground mining. So yes, those discussions have been happening for a very long time. OEMs if you take aviation back to your question on SAF, there's no secret. All the engine manufacturers are working on producing engines that are consuming less fuel. During the pandemic everyone wanted to get rid of the A380 in general, you don't want to see a quadri-reactor planes anymore. It has shown a bit of a limit and now we see them coming back because we are not ready yet. But yes, fuel efficiency is everywhere.

Any other questions? Mark?

Yes. Just a question probably for Carolyn, just on the capital allocation. If you overearn in the refining business, which probably seems like the most likely area of upside given the volatility we're seeing. What's the order of preference in terms of if you're slipping below the 1x debt-to-EBITDA, do you accelerate growth in C&M, do you do acquisitions? Or is there a scenario to actually return capital in the next couple of years?

Well, yes, I mean, certainly, if we do have outsized earnings returning excess dividends to shareholders is always an option. I guess we tried to set out the order in terms of our capital framework. Of course, we need to have safe and reliable operations first. But in terms of, Mark, is your question around where would we, if we had outsized earnings, would we grow first or turn to shareholders first.

For example, the $50 million of CapEx net of lease -- leaseholder landlord investment, could you double that, for example? Or operationally, is that just not something you'd be ready for?

Yes. Look, I would suggest that if Jevan has proven the return on the capital that, that would be, for me, an obvious place to go first because that's going to grow our sustainable earnings base better, which, over time, should give our investors a better return over time because then we can pay out dividends on a more sustainable basis, it's growing faster.

Okay. Great. And just more of a modeling question. In terms of the dividend policy, refining didn't really make money in the first half. So it wasn't really an issue. But going forward, are we still applying this full year refining payout?

Yes, yes, that's unchanged.

Any other question? All right. Well, I might wrap up then. Look, thanks again very much for joining us today and for all your great questions. I guess what we sought to set out today was obviously to restate the progress we've made and the track record over the last few years. We are coming up to 10 years as Viva Energy next year, 5 years as a listed company, but we achieved a lot in that time. We are a very different looking company from when the business was bought from Shell 10 years ago. We're, in my mind, starting a new chapter as the company to know it's the next 10 years with obviously, some very -- seems to be a very strong ambitions in each -- for each part of our business, which we've set out today. Yes, there's a lot to do. I take absolutely, we all feel challenges and opportunities that are ahead of us. But I think I've made the point that we start from a pretty advanced position because we've already got a good track record and particularly I can see that in the commercial business. So we've already got runs on the Board. But we've also made investments, particularly in our retail business to acquire the capability that we need to progress those strategies. So we're not starting from an ambition and a goal without the capability to go and deliver on it and have to do all of the test and learn and trials and tribulations that you would normally have to do. We actually start with a proven business model and acquired capability, which is not just people, it's processes as well and systems that support that. So I think we start with a high level of confidence about our ability to deliver on the ambitions that we've set out today for over the next 5 years. And that clearly delivers a sustainable -- a level of sustainable earnings well above $1 billion a year for our business into the future. So we do start with a great level of capability. But I guess, I would also make the point that in our organization, we are very much an organization that is driven by people. It's a phrase that we use quite seriously within our company. And obviously, that organizational size has grown, but we've acquired -- a lot of people have joined us as part of the retail acquisitions and very excited about the journey we're on and the results that we've delivered today have all been delivered by the people that work with Viva Energy and have a great degree of confidence around the ability for them to go and deliver on the goals that we've set today, obviously led by the team at this table, but a real capable set of next-level leaders as well in the organization. So we're incredibly excited about the journey. I can often get asked what is success ultimately look like. And I often joke, but I'm probably reasonably serious about it as that for 5 years' time, we're having a debate about whether we should drop the energy from our name because our business is actually a lot more diverse. Energy is still a big part of it, but we obviously aim to build a very big convenience business, a very big specialties business. If we get to the point of challenging whether that title -- that name for the company is still relevant, then I think we've been very successful. And that will be a nice problem to have and I think sets us up as a very different business moving into the future. So we'll obviously come together shorter than 5 years and report back on how we're progressing. But thank you very much for your support for joining us today, and I look forward to having questions -- engaging with you further over lunch. And for those of us -- those of you joining us for dinner tonight in Adelaide, hopefully, we have some planes that leave and get there on time. So we'll see you at the other end. Thank you.