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

Thank you for standing by, and welcome to the Viva Energy Australia Half Year Results 2026 Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Scott Wyatt, Chief Executive Officer. Please go ahead.

Good morning, and thank you for joining us to discuss our 2026 first half results. With me on the call is Carolyn Pedic, our Chief Financial Officer; Denis Urtizberea, our EGM of Commercial; Jennifer Gray, our Chief Strategy Officer; and Teresa Rendo, our new Retail CEO. On the call, Carolyn and I will share the group results, while Jen and Teresa will provide more commentary on our retail convenience businesses, and Denis will be available to answer any questions around commercial. As foreshadowed in our quarterly trading update, we have delivered a record earnings this half, supported with strong performances in all of our business units. These results reflect a substantially improved refining margin environment driven by events in the Middle East, but also improving retail sales growth and continuing strength of our commercial businesses. The improvements in our underlying business are very encouraging, and we expect to be able to continue building on this as we cycle through this extraordinary period. Despite significant volatility, I'm very pleased with the way we've managed the significant inventory and supply exposures and maintained capital discipline throughout the period. The resulting strong cash conversion has strengthened our balance sheet with net debt reducing from $2.1 billion at the end of '25 to $1.7 billion at the end of June. In recognition of these results, the Board has determined an interim fully franked dividend of $0.0773 per share, representing a 70% payout of C&M and C&I NPAT on a replacement cost basis, which is, of course, at the top end of the company's dividend policy. In line with our policy, the contribution of the E&I business will be assessed at the conclusion of the financial year. That said, we expect the E&I business to continue performing well through the second half. Notwithstanding these excellent financial results and an improvement in our personal safety performance, it is important to acknowledge that we had a significant process safety incident in April which resulted in a fire within the gasoline complex. We are fortunate that no one was seriously hurt and that the fire was safely contained by the professional actions of our response teams, but this is indeed a serious incident, which we are determined to learn from. As we've previously confirmed, the refinery is expected to maintain operations at more than 90% of its normal operating capacity until the unit is repaired or replaced. We are assessing technology solutions, and we'll work with our insurers to determine the best pathway forward over the coming months. Given this is a long-term investment decision, our approach will also be influenced by the government refining retention policy, which is currently under development and which I'll cover in a little bit more detail later in the presentation. The first half of this year was obviously shaped by the geopolitical events, which have caused significant disruption across the global energy markets. While these events have severely tested traditional supply chains, we have worked closely with governments, customers and our suppliers to maintain production and supply throughout the period, leveraging Viva Energy's integrated supply chain capability. Our trading relationship with Vitol, coupled with our domestic refining capability, provides important diversification of supply, which reduces risk of supply disruption and provides critical earnings protection during periods of high volatility. Our refining business benefited from higher regional refining margins and the term supply arrangements with Vitol insulated the company from the extremes of price escalations over the period. Underscoring the importance of domestic refining to the country's energy security framework, the government updated the fuel security services payment scheme to provide more protection during periods of low regional refining margin and is engaging with us on a new program to retain refining through the next decade. As part of this program, we successfully completed commissioning of the Ultra-low Sulfur Gasoline project at the beginning of the year. Yet again, our commercial business delivered an exceptional performance through a period of significant disruption and volatility. This reflects the diversity of our various businesses within commercial, the quality of our customer base and the strength of our infrastructure and supply chains. Sales volumes lifted to 5.9 billion liters, driven by strong demand across the portfolio, lifting underlying EBITDA to around $250 million for the half. Both C&I and C&M benefited from advantaged term supply arrangements that were in place prior to the conflict in the Middle East and which have insulated the business from elevated and volatile prices across the period. After allocating these benefits and other initiatives to manage costs and margin, C&I earnings lifted to $305 million for the half. Notwithstanding the effects of the fire at Geelong refinery, our E&I business delivered an EBITDA of $354 million for the period, underpinned by exceptionally strong regional refining margins. GRM for the half averaged over $21 per barrel, which is in line with the GRM recorded for July and is expected to remain strong for the remainder of the year. Operating costs were elevated during the half due to measures taken to stabilize operations and recover from the loss of the Alkylation unit. However, we expect these costs to moderate as we adapt to a new operating setup. Before I hand over to Jen and Teresa, let me just touch on the fuel security measures recently announced by the federal government. Collectively, these represent a significant investment in critical energy infrastructure to improve fuel security and support domestic refining and together offer opportunities for Viva Energy to further strengthen its infrastructure positions. Right now, we are heavily engaged with government on policy development to provide long-term investment certainty for the refining sector, which we expect to provide more certain returns than provided under the current FSSP framework. Together with the development of government-funded storage, we anticipate these programs can strengthen our refining operations and accelerate the development of our Energy Hub at Geelong. We expect consultation engagement to materially progress through the remainder of this year. Let me now hand over to Jen to talk about our Convenience business.

Thanks, Scott. I'll start with our trading performance on Slide 11. The first half result shows a material improvement in the Convenience and Mobility with EBITDA increasing to $139 million from $74 million compared to the prior corresponding period. The first part of the bridge normalizes the benefits from prior period acquisitions, including Liberty Oil Convenience and the transition to own fuel supply in South Australia as well as an adjustment that recognizes poor industry trading conditions in 2025. The second part sets out the underlying trading performance with improvements supported by higher fuel sales, stronger retail fuel margins and an allocation of supply benefits achieved during this period. Total retail fuel volumes increased by around 2% with diesel, the primary driver of this growth. Margins were partially offset by a one-off excise reduction that was passed through to the market in full immediately. In Convenience, total sales were lower, reflecting the continued year-on-year decline in tobacco, but importantly, tobacco sales remained stable over a 12-month period. And sales excluding tobacco increased by 1.3%, supported by increased customer visits and a more coordinated promotional activity. These benefits were partially offset by inflationary pressures, including wages and rent, together with other costs such as the year-on-year impact of legacy electricity contracts that expired mid-2025. Overall, the results show that the earnings base is improving. The next phase is to build on the momentum through better retail execution, great control of the supply chain and disciplined investment in the network. During the half, we made progress against the 5 priorities through which we are building a stronger and more scalable retail operating platform. Together, these priorities are designed to improve the customer proposition, strengthen execution and establish a platform for sustainable earnings growth. First, under Team & Customer Obsessed, we passed through the full excise reduction promptly, providing customers with relief during a period of elevated fuel prices. We also rolled out Flybuys across OTR, aligning loyalty and customer data across the OTR and Reddy Express networks and addressing a specific pain point for customers at our converted locations. Under Retail Excellence, we appointed a new Retail CEO and have continued to strengthen the broader leadership capability of the business. We also maintained strong retail fuel supply through a period of significant market disruption and demand uncertainty. Our efficient supply chain is progressing to plan. Distribution capability has now been established across the Eastern Seaboard, and we are on track to exit from the Coles product supply agreement by the end of November. We've also focused on the Curation of our offer, starting with a review of the product range, simplification of our offer and improving its relevance to customers. We've sourced the first private label products ahead of launch in the second half, initially focused on everyday categories such as milk and water, addressing a key gap in our offer. Finally, under the right network and format, we've adapted the full year '26 development program to focus capital on highest return opportunities, which I'll cover in more detail on the following slide. Our network strategy is focused on having the right format in the right locations, supported by disciplined returns-led capital allocation. We have adapted the full year '26 development program in response to evolving market conditions. The program continues to be led by opening new OTR stores paired with conversions where the economics are compelling. For full year '26, we expect to deliver 20 to 25 new OTR stores, supported by a smaller number of conversions to both OTR and Liberty formats. We're also progressing the conversion of 25 to 30 stores to an unattended self-service format. These are predominantly locations where the shop sales do not support continued investment in a fully attended store, but where the fuel site itself remains attractive. We are trialing an unattended format that retains a customer proposition through features such as a small kiosk vending and collection capability while materially lowering the operating costs of the site. Customer acceptance across the 3 trial locations has been encouraging with improved fuel sales and site performance with payback periods aligned with industry norms. We will apply the learnings from these trials as we progress the 2026 conversion program. Establishing an independent supply chain is a critical enabler for our next phase of convenience growth. Distribution capability is now operational across South Australia, the Northern Territory, Victoria, Tasmania, Queensland and New South Wales. Western Australia remains on track for November, which will allow us to complete the national rollout and exit of the Coles product supply agreement by the end of November 2026. Our integrated supply chain gives us great control over ranging, promotions, forecasting and inventory and allows us to respond more quickly to customer trends, creating a platform for private label and higher-margin growth. The early operational indicators are encouraging. Store deliveries are reducing and lead times for new products are becoming materially shorter. We expect the more meaningful financial benefits to emerge progressively from 2027 as we optimize operations. It's now my pleasure to hand over to Teresa to take you through the retail earnings growth road map.

Thanks, Jen. Our efforts over recent periods have really remained focused on both organizing and stabilizing our end-to-end convenience and mobility business, including bringing it to self-sufficiency from transitional arrangements. As we look forward, we have a structured road map to unlock earnings growth across retail. In half 2, our sequencing of near-term execution is broadly focused on progressing initiatives that have already commenced and are in trial ahead of medium-term scale benefits that include supply, range, buying and network through FY '27. If we look at our work streams and starting with our team and customer obsessed, we are well progressed in how we organize our team as one Viva Energy retail team, removing duplication and working consistently with further unlock to be realized in half 2. Further to this, we have a clear plan to deepen customer engagement through data-led personalization and unlocking those customers that are active within our database, starting with Flybuys. Retail excellence is our second pillar, and we are centered on strengthening leadership, systems and processes to lift execution, efficiency and consistency. My initial observations after 4 weeks is that the uplift that exists in this space and the efficiency gains are both real and measurable. The efficiency of our supply chain is key. As Jen has already shared, our immediate focus is to have a supply chain that we can fully scale from December 2026 and into 2027, where we will unlock synergy from being just-in-case on our stock to just in time. Through embedding a new operating model, we will progress increased control of our end-to-end supply and focus that to match demand so that we carry less safety stock in our stores. Curation of our offer is another key unlock. We are buoyed by our recent quick win trials that advance our product range review disciplines, better segment our ranges, expand our private label penetration and grow where we under-index in category. This will improve productivity per square meter, basket penetration and overall health of inventory. Lastly is the right network and format. It includes continuing our pipeline of network expansion and format optimization that Jen has shared, but more so ensuring that we better embed the learnings in this space to drive down CapEx and improve performance. So if I was to summarize on where we've been and where we're going, the clear message is that F '26 is about completing the retail foundation platform, while F '27 will convert that platform into better execution, improved customer outcomes and sustained growth. We recognize that much of this work is still in delivery. Our focus is on disciplined execution and clear measurement of all benefits underpinned with a robust retail scorecard. I will now hand over to Carolyn to discuss our financial performance.

Great. Thanks, Teresa. I'll start on Slide 17. So group EBITDA on a replacement cost basis was $774 million, and that compares with $305 million in the prior corresponding period, with all 3 business segments delivering strong earnings growth. NPAT on a replacement cost basis increased to $371 million despite higher depreciation associated with the commissioning of the ultra-low sulfur gasoline unit and other recently completed investments. Importantly, the strong earnings performance also drove underlying free cash flow of $449 million, reducing net debt to $1.7 billion at 30 June. On Slide 18, you can see that operating free cash flow was $604 million. This strong cash conversion was an important contributor to the significant reduction in net debt during the half. And given we report on a pre-AASB 16 basis, EBITDA continues to remain a good proxy for underlying operating cash generation with underlying operating free cash flow closely tracking EBITDA. Now net CapEx was $123 million in the first half. Most FY '26 CapEx is weighted towards the second half and relates to new retail stores, store conversions and other scheduled project activity across the business. While expenditure is weighted towards the second half, our approach remains disciplined and focused on attractive returns. And today, we reaffirm FY '26 CapEx guidance of $350 million to $400 million, which remains materially below FY '25. Now as you can see on the next slide, net debt closed the first half at $1.7 billion, down more than $350 million during the period. This contributed to gearing of 1.5x total net debt to EBITDA, and that compares with approximately 3x at FY '25. Elevated first half earnings have supported this outcome, and our focus remains firmly on managing leverage at around 2x through the cycle. At 30 June, we have had a really strong liquidity position supported by substantial undrawn committed facilities and cash on hand, providing significant financial flexibility. Now moving to Slide 21. This sets out our capital management framework, which remains unchanged. It also sets out the priorities we communicated in the FY '25 results. The first half saw a disciplined investment and strong cash generation, supported by a material improvement in the balance sheet. Against that backdrop, the Board determined an interim dividend at the top of the policy. On Slide 22, this shows our progress against those capital management priorities we set out, and those were set out in February. The FY '26 CapEx guidance remains $350 million to $400 million, again, materially below FY '25. We improved convenience inventory management in retail, and we reduced inventory levels by approximately $300 million during the half. In Retail, the supply chain rollout remains on track, and we have reworked the network development plan to focus on capital on the highest return opportunities. Discussions with the federal government on FSSP Phase 2 to address the refinery's earnings profile are progressing. Our surplus land review continues with previously identified sales opportunities being considered alongside the federal government's recent fuel security announcements, including the proposed minimum stockholding obligations and sovereign fuel reserve initiatives. And finally, gearing has significantly improved as it has benefited from very strong first half earnings and favorable cash flow. And our focus again remains on maintaining leverage at approximately 2x through the cycle. Now on Slide 23, we can see that the Board has determined an interim fully franked dividend of $0.0773 per share. This represents a 70% payout ratio of replacement cost of NPAT from the Convenience and Mobility and Commercial and Industrial segments and is at the top end of the company's dividend policy range of 50% to 70%. And consistent with our dividend policy, the Energy and Infrastructure segment is assessed on a full year basis. So the dividend outcome reflects a strong performance in the first half and a material improvement in the balance sheet. The dividend will be paid on the September 30, 2026 to shareholders on the register at the September 7, 2026. Our dividend reinvestment plan remains active and is not underwritten. Eligible shareholders can reinvest their dividends into shares at a 1.5% discount. I'll hand back to Scott to provide an update on the outlook.

Thanks, Carolyn. Let me close the presentation by making a few comments about the outlook for the business through the remainder of the year. As mentioned earlier, we entered the second half with a stronger balance sheet and a clear focus on disciplined execution. While international markets remain volatile, we expect this to benefit our refining and commercial businesses with continued strength in regional refining margins and our fuel supply arrangements. We are setting ourselves up to optimize production and work around the Alkylation unit while we assess long-term options to replace this capability. In the interim, we expect to be able to maintain production above 90% of our normal capacity and maximize the opportunity of the strong refining and margin environment that we see. Our Commercial business continues to perform well and typically excels in the volatile market conditions that currently persist. The team are very focused on achieving our long-term aspirations to organically grow this business and have made further progress on this agenda despite the current environment. The Retail business has delivered a strong underlying performance, and I'm pleased with the progress we're making to restore growth after a challenging couple of years. It's really exciting to have Teresa join us, and she's already making a very positive impact after a short time in the role. I expect us to move quickly from here to build momentum now that we have largely completed the integration of our various retail businesses. We will, of course, have much more to share at our Investor Day in Sydney on the 9th of November, where we will provide a deeper update on strategy and medium-term priorities. But for now, let me open up to your questions.

[Operator Instructions] Your first question comes from Mark Wiseman from Macquarie Group.

Obviously, we've seen a strong set of results, but quite a large divergence between Ampol's and Viva's, and part of that goes back to the supply chain models that you each run. I understand Vitol created the entity and brings a lot of value to the relationship in terms of sourcing and secure supply. But I just wonder if you could talk us through as you come up to this renewal with Vitol in 2028, what levers are available to you to reduce the dependence on Vitol and start to stand up your own supply chain and enjoy some of those benefits over time? And how long could that take?

Yes. Thanks, Mark. I mean, obviously, the relationship with Vitol has been in place for probably 10 years in 2028. It is the model that was set up at the creation of Viva Energy. And look, it has performed well over that time. And I think, look, even in the half that we've just had, you can see it has delivered significant value if you look at the contribution from our term supply agreements in the first half across, which has been allocated to both Retail and Commercial. It's about $110 million of value that's been created over that time. And that's obviously without us running our own trading operations in Singapore. So it does provide important support, which is mostly particularly valuable during periods of high volatility like we've just been through, and that was the case during the early days of the Ukraine crisis as well. But look, as you point out, the agreement that comes up for renewal in 2028. It's an option that Vitol have, but it's an option that we will sit down and formally review with them ahead of that time. It has been in place for a long time, and there's certainly -- and has continued to evolve over that time in terms of how we work together as well. So we'll take the opportunity to explore how a renewal might look and what we would want from that with them over the next year. So that's a bit in front of us, Mark, but certainly rush in our mind, but it comes from a point of view of it's been a good -- very strong, good relationship that we've had. And as I've just said, delivered important value during critical periods.

Your next question comes from Tom Allen from UBS.

I'd just like to understand, if I can, just more on the economics that you're targeting on the unattended offer. I think Jen, your comments on the call were that the payback periods are aligned with industry norms. So are we right to assume about $300,000 in CapEx and $350,000 in incremental EBITDA per site in the way that we apply our modeling for this opportunity going forward?

I think that would be a fair assumption, yes.

Easy, play on. Okay. In C&I, we've seen some growth in petrol and diesel on PCP. Should we expect more growth here just as large fuel users who may have historically sought to save a few cents per liter on fuel costs by accessing regional and spot markets now potentially look to lock away a more reliable source of long-term supply with a fuel supplier like Viva. I just ask because C&I has been a real strength for the business. I'd like to understand if there's more growth that could come through here.

Thanks, Tom. I'll hand that to Denis.

Yes, that might well be the case, obviously. As you know, we see some very different behaviors from one segment to the other. Certainly, there will be some more growth available in particular, in aviation, where business has been significantly disrupted in the first half. How people are going to play and what kind of contracting arrangement that will look for in the future is a bit of a question mark at the moment. The market has stabilized. It's not very clear who is going to play in the near future. But overall, the business is still growing and the fundamentals of our business are definitely look very strong. And certainly, this period of volatile environment is benefiting us and encourages a number of people who would normally transact a bit more transactionally to look at their business from a more strategic lens and certainly prefer to deal with us in those circumstances. So -- and that's probably the reason why Scott was mentioning a higher cost environment is usually beneficial to commercial because not encouraging people to play transactionally. Does that answer your question?

It does. And if I could just sneak one more. Scott, you've shared some color in the release today on the opportunities for Viva arising from the government's $14.8 billion fuel security reforms. Just on refining retention, how should we frame the scope of outcomes here? Is it more likely that we see another adjustment to the FSSP support level? Or perhaps is it more likely a Commonwealth subsidy on the growth investment like we saw for the Ultra-low Sulfur Gasoline project? And similarly, how should we scope the funding requirements for Viva to support building or supporting the Australian fuel reserve and meeting the new MSO obligation?

Yes. Thanks, Tom. There's a few questions on that one. Look, I mean, the FSSP, the current scheme has obviously -- I mean, it's been a milestone program really, I think, back in 2021, it was set up to provide the support that's necessary for us to continue refining. And as we've covered before, unfortunately, hasn't kept up with the cost of doing business in Australia, and there's been periods where it's been -- it has provided a level of support that already needed to maintain positive cash in that part of the business. It was particularly pleasing to see the federal government update that at the beginning of this year, and I think that helps set us up to navigate the next few years until the end of that agreement in 2030. So a new arrangement, which we're currently in discussions with takes us well beyond 2030 into the next decade, potentially through to the end of the decade. It's a very long -- it's a way in the future. It goes for a considerable period of time. So I don't think the current FSSP really provides a framework that's going to be robust enough over that period and provide a necessary return on capital through what will be a pretty uncertain time for refining. So I think it's going to -- it will have to be a variation on FSSP that also provides a component that delivers that capital return to allow us to make that sort of commitment, move forward with confidence from an investment perspective and ensure that whatever investments we make in refining is going to stand up relative to other investment opportunities that we have across the rest of the business because those are the choices that we have. So that's kind of at a high level, the broad framework that we would be looking for and that is how we're engaging with government at this point in time. Obviously, we've got -- now we've got also government fuel storage being -- will likely be built and then lifting in MSOs. Now I mean the 2 different programs, the government storage program will obviously be a program that's funded by government. And the way the consultation paper has been framed, we will be looking for industry to provide services to both build storage and store product on behalf of government over a long-term commitment. So I think that's potentially attractive for us, particularly around our refining business to further strengthen that business, provide -- additional storage does provide economic benefits to the refinery, but potentially -- and with government funding, I think, a potentially attractive investment proposition. MSOs is ultimately a cost on industry to fund and reflective of -- obviously reflects the size of the business that we have. That's a little bit more challenging to navigate in the sense that it is an additional cost. We would need to see good commercial benefits from building that storage to support the business that we have and a pathway to recovering that cost from the market. And I think that's just to work through and better understand and look at the opportunities that we have around the country where we can actually make good use of any funding that might be available to support the development of storage to meet the MSO obligations. So that I think will be something that will come out of the consultation process that's just been kicked off, so -- which we'll obviously participate and watch closely.

Your next question comes from Adam Martin from E&P.

First question just on, sort of, retail fuel margins in July, August. They're quite low, getting some industry feedback that Viva is sort of trialing different things around pricing. Can you perhaps talk through that? Does that relate to that allocated supply benefit as well in C&M, please?

Yes. I think the interesting thing when you look across July and August fuel margins is to remember that we actually had an excise revaluation across both July and August. And if you're comparing AIP data to retail board prices that, that won't be reflected in that data. I think it would also be fair to say that we saw after a period of quite constrained demand through March and April, certainly plenty of product in the market, and that naturally played out across retail forecourts. From our perspective, we continue to offer a competitive price for our customers, and we continue to do that thinking about the segments we're operating in. So we have -- we're very fortunate to have a low-cost channel to market through our Liberty Oil convenience offer and a best-in-class loyalty and docket redemption offer through our Shell, OTR, Reddy Express offer. And that's how we think about our pricing strategies for fuel across the network we operate.

Okay. That's good color. Just on refining, Scott, just thinking about costs and insurance and that post, will -- are there any costs that we should think about next 12 months that are outside insurance or any differences in the way you're going to run the refinery? Just trying to think about OpEx or maintenance CapEx, that sort of stuff, please?

Not really. I think look, we -- obviously, in the aftermath of the incident and managing this lower production through that period as we brought production back online, we did incur additional costs, both in terms of managing the incident and managing a pretty inefficient production period through that first half. So that's been reflected in the higher OpEx in the first half. We have done a lot of work to stabilize operations and get comfortable running the plant in a different mode than what we would have traditionally do. And we obviously need to do that for the long term as we work through the replacement of the units. So there's still a little bit more to do to really settle that down, but we're well advanced and I expect to get to pretty optimal production mode through the course of the next month or 2. So -- yes, I think the main impact to refining is really what we've called out and the way to think about it is that production will be somewhat less than 100%. But -- and if you work on that sort of guidance, that sort of covers all of the factors that go into running in the mode that we'll be running at for an extended period of time.

Your next question comes from Rob Koh from MS.

Can I ask about the refinery, if you could give us any steer on how we should be thinking about insurance recovery. Looking at the financials, it looks like the impairments and disposals is around $20 million, $25 million. Is that the right number we should be thinking?

Thanks, Rob. So the number that you're looking at, that's just a historical written down value of the assets that were damaged in the fire. So that's not instructive when thinking about a replacement of a unit, which as Scott shared, we're working through the details on. So that should be viewed separately.

Okay. And then thinking about eventual replacement of Alkylation unit and the other government policies, can you talk to the -- any ability to increase capacity or increase production of diesel or even incorporation of renewable diesel into the mix?

Yes. I mean we're certainly -- Rob, certainly looking at what's the right technology solution to move forward with the replacement of the Alkylation capability that we had, certainly an opportunity to look at new technologies and also with a mindset of what's the right production that will serve us well into the next decade when obviously demands are going to be reshaped, particularly probably a decline in gasoline demand over that period. So it's a work in progress, but certainly very much on our mind about the selection of the technology. We have -- as you probably know, we've been working on projects to process biogenic feedstocks and produce lower carbon fuels through our refinery at Geelong. Those projects remain really very interesting to us. And I think with the right policy settings around particularly demand side policies for lower carbon fuels, the projects that I think can be commercially sensible for us to progress. That is quite independent from the work we need to do around the Alkylation unit. But I think if we're going to run the refinery for another -- through the end of 2040, having capacity to produce lower carbon fuels is a sensible and attractive set of projects for us to be looking at.

Your next question comes from Gordon Ramsay from RBC Capital Markets.

Thank you for delivering a solid result today. Scott, just following up on your comment on guidance on the refinery production volumes. I'm just trying to get my head around why you're not at 100%, assuming just the Alkylation unit was damaged and you can import alkylate and blend. Am I missing something?

No, I think it's a proxy, Gordon, for a range of impacts from losing Alkylation unit. I think the main impact is that we -- I mean, the Alkylation unit processes gas and particularly LPG and turns that into alkylate, which is used in high octane fuels such as premium fuels and gas. We, therefore, have a surplus of LPG at the current time that we need to manage, and that does have knock-on impacts to production -- optimal production across the plant. There's projects that we're working on at the moment to allow us to manage that gas balance better than we otherwise will be set us up to be able to do that over the long term. So I think we get closer and closer to 100% as we get that capacity installed. But obviously, we lose the margin associated with produce that we gain from producing alkylate and producing high-octane fuels. Now that's not a production impact necessarily per se, but the guidance we've given is a proxy for all the different effects that come from running a refinery without the Alkylation unit. So it's not -- it's a simple measure of, Gordon -- and one that we'll reassess as we get clearer on the long-term impairments to what to the extent that there are any and then we need to update guidance because we've got a clear review, we will. But for now, that's the best guidance we can give.

Okay. And then just moving on to the portfolio review. You said you're evaluating surplus land sale opportunities. Is that mainly retail sites? Or does it include other assets?

No, the retail sites are all leasehold. So we certainly manage that portfolio of assets, but more as a leasehold decision as leases come up, do we want to renew and how do we develop those sites. So that's less of a divestment opportunity. But -- so it's mostly land associated with our operating facilities around terminals and refining -- the refining business, a surplus land that we are unlikely to use. Now as Carolyn said, we're just reevaluating that at the current time to understand what land we might need for any storage opportunities that we wish to pursue. So that's -- I think that's obviously a new consideration that we just need to take into account. But otherwise, there is certainly surplus land around our major facilities, particularly that is highly valuable and not necessary to support our long-term business.

Any feel for the value of that in round figures? Is it material?

It's material, but we haven't disclosed -- we haven't -- it's early days. We're still working through how we would -- what we would look to sell over what time frame and what value. So I think that's one for another update, Gordon.