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Why the Ampol (ASX:ALD) share price is racing 8% higher

Here’s why the Ampol Ltd (ASX:ALD) share price is racing higher on Monday…
The post Why the Ampol (ASX:ALD) share price is racing 8% higher appeared first on Motley Fool Australia. –

The Ampol Ltd (ASX: ALD) share price is racing higher today after the release of a positive announcement.

At the time of writing, the fuel retailer’s shares are up 8% to $30.81

What did Ampol announce?

This morning the fuel retailer announced the completion of its convenience retail property transaction and its plans for the funds.

According to the release, on Friday Ampol, formerly known as Caltex, completed the sale of its convenience retail property which will generate net proceeds of approximately $635 million.

This is higher than the prior guidance of approximately $612 million due to lower than estimated transaction costs on completion of the transaction.

What will Ampol do with the proceeds?

When the company initially announced the transaction, given the then prevailing uncertainty around the COVID-19 pandemic, management advised that it would use the proceeds to reduce leverage in line with its Capital Allocation Framework.

However, since then, Ampol has experienced an improvement in its trading performance following the lifting of numerous COVID-19 restrictions.

In light of this, management has decided to use the property transaction proceeds for a combination of reducing leverage, pursuing appropriate growth opportunities, and returning capital to shareholders.

In respect to the latter, this morning Ampol has announced an off-market buy-back of approximately $300 million. This is planned to commence immediately and complete in the first quarter of FY 2021 and is expected to deliver earnings per share accretion for shareholders.

Ampol’s Managing Director and CEO, Matthew Halliday, commented: “We have delivered on our stated 2019 plan to unlock value through network optimisation and I am pleased the completion of the property transaction will further strengthen our balance sheet while allowing us to return capital and release franking credits.”

“The property transaction has complemented the resilient performance of the business in a tough environment and the strong action we have taken to protect cash flows in response to COVID-19,” he added.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the Ampol (ASX:ALD) share price is racing 8% higher appeared first on Motley Fool Australia.

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