Caltex Australia says its decision to buy out franchisees and have only company-owned stores has nothing to do with staff underpayment issues uncovered at a number of franchise outlets.

The major overhaul of its business model comes after a two-year review sparked by media reports in 2016 that uncovered cases of staff underpayment and triggered an ongoing Fair Work Ombudsman investigation.

Chief executive Julian Segal says the group’s decision to spend $100 million to $120 million on converting all outlets to company-owned stores by mid-2020 is separate to the wages issue.

“The decision to take over the operations has nothing to do with the franchise underpayment issue,” he told reporters on Tuesday as the company announced its full-year results.

Caltex is about halfway through an audit of its franchise network following the media reports and so far 77 franchisees have left the business due to breaches.


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Another 116 agreements were terminated after franchisees left the network without participating in the audit, 29 sites are resolving minor issues while 70 sites have been cleared.

Of the terminated sites, Caltex has taken over 130.

Franchisees operate 433 sites and the company now operates 314 sites.

Mr Segal said taking control “of the core business” would allow Caltex to best achieve its growth targets.

“This is key to accelerating the changes required to provide a more consistent customer experience, to roll out new platforms, to standardise services and to simplify supply arrangements.”

He said Caltex would work with franchisees to manage the impact of this change, including offering them employment.

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

So far, 269 claims had been received and of these 155 claims had been approved with the average claim being worth $25,000, the company said.

Announcing its full-year results, Caltex said it has rolled out 26 of its new format “The Foodary” pilot stores that offer healthy food on-the-go and convenient services like parcel pick-up and dry cleaning.

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

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

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

Shares in Caltex were up $1.59, or 4.5 per cent, to $36.59 by 1442 AEDT.

CMC Markets chief markets strategist Michael McCarthy said moving away from the franchisee model had pleased the market as had the company’s operating result.


* Net profit up 1pct to $619m

* RCOP up 18.5pct to $621m

* Revenue up 19pct to $21.4m

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