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Vivo Energy PLC - Intention to Float announcement
Vivo Energy Plc
Intention to Float announcement (“ITF”)
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN OR AUSTRALIA OR
ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT
LAWS OR REGULATIONS OF SUCH JURISDICTION
This announcement is an advertisement for the purposes of the UK Prospectus Rules
of the Financial Conduct Authority (the “FCA”) and not a prospectus. This
announcement is not an offer or an advertisement to sell, or a solicitation of an
offer to acquire, securities in the United States or in any other jurisdiction,
including in or into Australia, Canada or Japan.
Neither this announcement nor anything contained herein shall form the basis of, or
be relied upon in connection with, any offer or commitment whatsoever in any
jurisdiction. Investors should not purchase any Shares referred to in this
announcement other than solely on the basis of information that is contained in the
prospectus (the “Prospectus”) expected to be published by Vivo Energy plc (the
“Company”) in due course in connection with the proposed admission of its ordinary
shares (the “Shares”) to the premium listing segment of the Official List of the
FCA and to trading on the main market for listed securities of London Stock
Exchange plc (the “LSE”) (together, “UK Admission”) and to listing and trading as a
secondary inward listing on the main board of the securities exchange operated by
the Johannesburg Stock Exchange Limited (the “JSE”) (“JSE Admission”, and together
with UK Admission, “Admission”). Copies of the Prospectus will, following
publication, be available for inspection from the Company’s registered office at 3rd
Floor, Atlas House, 173 Victoria Street, London, SW1E 5NA, United Kingdom and the
Company’s website at http://investors.vivoenergy.com. References in this
announcement to “Vivo Energy” or the “Group” mean the Company and Vivo Energy
Holding B.V. (“VEH”, the current holding company of the Vivo Energy group),
together with its consolidated subsidiaries and subsidiary undertakings. Following
the completion of a pre-IPO reorganisation, the Company will own 100 percent of the
share capital of VEH. The shareholders of VEH prior to Admission will be Vitol
Africa B.V., HIP Oil 2 B.V., VIP Africa II B.V., HIP Oil B.V. (the “Selling
Shareholders”) as well as certain members of management, all of whom will exchange
their shares in VEH for Shares in the Company immediately prior to Admission.
10 April 2018
Vivo Energy
Vivo Energy announces intention to float on the London Stock Exchange and the
Johannesburg Stock Exchange
Vivo Energy, a leading retailer and marketer of Shell-branded fuels
and lubricants in Africa, announces its intention to proceed with an
initial public offering (the “Offer”). The Company intends to apply
for admission of its Shares to the premium listing segment of the
Official List of the FCA and to trading on the main market for
listed securities of the LSE and for admission of its Shares to
listing and trading as a secondary inward listing on the main board
of the JSE. It is expected that Admission will occur in May 2018 and
is subject, amongst other factors, to market conditions.
Vivo Energy: at the heart of the African growth story
- Market leading pan-African fuel retailer operating under the
highly-valued Shell brand in attractive, high growth markets
in North, West, East and Southern Africa
- Established in December 2011 through the carve-out of Shell’s
African downstream business (excluding South Africa and Egypt[1])
- The Group sources, distributes, markets and supplies high
quality products and services to retail and commercial
customers across the continent
- Proven management team, with a track record of sustained
growth since carve-out:
o 25% Adjusted EBITDA CAGR 2015-17
o Over 500 service stations added since 2012
o Added or redeveloped more than 450 non-fuel outlets since
2014
o Increased market share in 14 out of 15 retail markets
since 2013
- Well placed to capitalise on Africa’s population and economic
growth
- Recently agreed a share transaction with Engen which, subject
to regulatory approval, will add nine new retail countries and
more than 300 service stations to the Group’s portfolio. This
provides significant potential to replicate the success of the
Vivo Energy growth model.
Market: compelling African consumer fundamentals
Vivo Energy has Shell-branded retail operations in 15 countries
across Africa, with an average 5% GDP CAGR 2016-21 and has access to
277 million consumers in these countries[2]. These are large and high-
growth markets, experiencing rapid urbanisation, vehicle growth and
increased consumer spending. Africa has a young and fast growing
population, and a growing middle class. It is projected that by 2050
there will be 1.2 billion more people in Africa[3].
Platform: pan-African footprint, market-leading number one brand
Vivo Energy holds the number one or two market position in 14 of its
15 retail markets and in 2017 had an overall market share of 23% in
its markets[4]. The Group makes full use of the globally respected
Shell brand, which is the most preferred fuel brand for consumers
across Vivo Energy markets, with a brand preference rating of 52% as
of September 2017[5]. Vivo Energy offers a compelling value
proposition for its customers and retail partners. Service stations
experience up to 25-30% volume uplifts upon rebranding to Shell. The
Directors believe that the trusted brand, with its strong track
record in Africa, also provides an excellent foundation in the
Commercial segment.
Business model: integrated, entrepreneurial and performance-driven
Vivo Energy operates an integrated marketing, distribution and
retail model. The Group owns or operationally controls critical
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supply infrastructure, including approximately 943,000 cubic metres
of fuel storage that provides it with a sustained competitive
advantage. Vivo Energy has more than 1,800 service stations, the
majority of which are company owned, dealer operated. This gives the
Group control whilst also enabling dealer entrepreneurship. In the
Commercial segment, the Group has a strong and established position
in many of its markets. The Group has around 2,350 employees and a
performance-driven culture with empowered and incentivised in-
country teams, combined with effective controls and governance.
[1] Plus smaller markets: Reunion and Togo
[2] Source: UN World Population Prospects 2017 (data as of 2015)
[3] Source: UN World Population Prospects 2017 (data as of 2015)
[4] Source: CITAC
[5] Source: Ipsos Global Brand Tracker (Q3 2017) conducted for Shell in all Vivo
Energy markets
Growth: organic and inorganic across fuel, convenience retail and
quick service restaurants
Vivo Energy has gained retail market share in 14 out of 15 markets
since 2013, further solidifying its leading positions in its
countries of operation. The Group has been successfully executing
its retail portfolio growth strategy, capturing unrealised
opportunities in the countries where it operates. Vivo Energy has
added more than 500 service stations since 2012 and has added or
redeveloped more than 450 non-fuel outlets since 2014. On average,
between 2015-17, the Group opened a new service station and a new
shop or food outlet every three days.
Financial model: resilient, strong earnings and high returns
The Group’s financial performance is based on resilient unit margins
in US dollar terms that are decoupled from oil price and FX
movements. A diversified portfolio across geographies and business
segments, high operating leverage, disciplined capital allocation
with strong returns and high cash conversion with structurally
negative working capital, all support this model. The Group has seen
6% volume CAGR 2015-17, 25% Adjusted EBITDA CAGR 2015-17 and strong
and growing ROACE (15% to 28% 2015-17).
Overview of the Offer
- 100% secondary sell-down of existing Shares by Selling
Shareholders, with no proceeds to the Company.
- Premium listing of Shares on the Official List of the FCA and
admission to trading on the main market for listed securities
of the LSE, with secondary inward listing on the JSE.
- Targeted offering to institutional investors outside the US
pursuant to Regulation S.
- Targeted offering to QIBs in the US pursuant to Rule 144A.
- The Company, its Directors and the Selling Shareholders are
expected to agree to customary lock-up arrangements.
- The Company expects to have a free float following Admission
of at least 25% and it is expected that the Company will be
eligible for inclusion in FTSE UK indices.
- Full details of the Offer will be included in the Prospectus,
expected to be published in due course. It is expected that
Admission will take place in May 2018. Investors should rely
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only on the information contained in the Prospectus when
making a decision as to whether to purchase Shares.
Rationale for the Offer
The Company believes that the Offer and the Admission of its Shares
to the LSE are logical next steps in the development of Vivo Energy
and appropriate given the Group’s current scale and level of
maturity.
The Directors believe that the Offer and Admission will:
- enable improved access to capital markets, thereby
strengthening the Group’s ability to execute its growth
strategy successfully
- diversify the shareholder base
- enhance the Group’s profile with investors, business partners
and customers
- further enhance the ability of the Group to attract and retain
key management and employees
- create a liquid market in the Shares for shareholders
The Offer will allow the Selling Shareholders to monetise part of
their holding. No proceeds will be received by the Company pursuant
to the Offer.
Dividend policy
The Directors intend to adopt a progressive dividend policy while
maintaining an appropriate level of dividend cover. This dividend
policy will reflect the long-term earnings and cash-flow potential
of the Group, consistent with maintaining sufficient financial
flexibility in the Group. It is therefore the Directors’ current
intention to target an initial payout ratio of a minimum 30% of net
income.
Financing
Vivo Energy Investments B.V. (“VEI”, the direct subsidiary of VEH)
has borrowed term and incremental facilities under a credit
agreement originally dated 6 June 2017. The Group intends that, on
or before Admission, a new revolving credit facility will also be
made available to VEI to support its and the Group’s working capital
requirements.
Board appointments
In conjunction with the intention to float, the Company announces
that prior to Admission John Daly will be appointed as Chairman of
the Company. John is also Chairman of Britvic plc, Non-Executive
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Director of Ferguson plc and Non-Executive Director and Chair of the
remuneration committee of G4S plc.
The Company also announces the further strengthening of the Board
with the appointment of Thembalihle Hixonia Nyasulu and Carol
Arrowsmith as Independent Non-Executive Directors, effective prior
to Admission. Further Board appointments will also be made prior to
Admission.
John Daly, Chairman Elect of Vivo Energy said:
“Vivo Energy has established itself as the leading independent fuel
retailer in Africa. The Group has a robust corporate governance
framework in place and its exposure to Africa means Vivo Energy’s
growth story is supported by compelling macro drivers. The Group has
a proven integrated business model with multiple growth levers and
many promising opportunities have been identified that Vivo Energy
is uniquely placed to capitalise upon. A listing provides an
excellent platform for the next stage of the Company’s development.”
Christian Chammas, Chief Executive Officer of Vivo Energy said:
“Bringing Vivo Energy to the public markets will enable us to
further grow the business and strengthen our market leading position
across Africa. Vivo Energy has a track record of strong growth and
financial performance. We are excited about the opportunities to
take the business forward and believe we have all the necessary
attributes to succeed as a listed company.”
Overview of the business
Vivo Energy has a geographically diversified portfolio, and operates
in three main segments across its markets in Africa:
- Retail – Retail is at the heart of the Group’s business and is
driving its growth across Africa. The Retail segment comprises
the Group’s network of Shell-branded service stations,
including company owned, dealer operated (“CoDo”), dealer
owned, dealer operated (“DoDo”) and company owned, company
operated (“CoCo”) service stations in 15 countries. The Retail
segment accounted for 65.2% of the Group’s revenues and 60.4%
of the Group’s Adjusted EBITDA in the year ended 31 December
2017.
o 8% volume CAGR 2015-17 across existing portfolio and new
service stations
o 26% Adjusted EBITDA CAGR 2015-17
o Non-fuel Retail Gross Cash Profit nearly doubled since 2015
o 700,000 customers served across our retail network each day[6]
o Underpinned by the Shell brand and other leading international
brands (Burger King, KFC, Subway, Java House) plus the Vivo
Energy-developed “welcome” brand in convenience retail
o In terms of the number of service stations, the Group is the
second largest retailer in Africa, outside of South Africa
[6] Average daily transactions, based on 20 litres per fill
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- Commercial – The Commercial segment comprises an integrated
customer offer of products and related product services to
commercial customers in the construction, transport, power,
mining, aviation, marine and other sectors in Africa, as well
as the Group’s LPG business. The Commercial segment accounted
for 29.7% of the Group’s revenues and 28.4% of the Group’s
Adjusted EBITDA in the year ended 31 December 2017.
o Strong, established positions in many of the Group’s markets
o Leading brand and strong track record in Africa gives the Group
an excellent foundation
o GDP growth and infrastructure spending are driving demand for
the Group’s products and services
o Real asset footprint enables the Group to serve customers
across the continent
o Based on volumes approximately 75% of the segment is “core”
(Commercial, not including Aviation and Marine) and mostly
recurring with established customers
- Lubricants – The Lubricants segment comprises sales of
lubricants through the Group’s retail service stations,
distributors, and commercial customers, including export sales
to more than 10 other African markets. The Lubricants segment
accounted for 5.1% of the Group’s revenues and 11.2% of the
Group’s Adjusted EBITDA in the year ended 31 December 2017.
o Unique partnership with Shell, the leading global lubricants
brand
o High margin, high growth, primarily consumer market
o Shell brand quality and differentiated Customer Value
Proposition
o Integrated value chain including manufacturing, distribution
and marketing
In December 2017, the Group announced two important acquisitions.
Firstly, as part of the Group’s strategy to continue expanding and
diversifying its portfolio, it entered into an agreement to acquire
Engen International Holdings (Mauritius) Limited (the “Engen
Transaction”). The Engen Transaction, targeted for completion in the
third quarter of 2018, subject to regulatory approval, will expand
Vivo Energy’s geographical retail footprint to a further nine
African countries and will add over 300 service stations.
Separately, the Group acquired 50% of Shell and Vivo Lubricants B.V.
(“SVL”) which sources, blends, packages and supplies Shell-branded
lubricants from six African-based blending plants.
Strong financial track record
The following table includes a number of Vivo Energy’s key
financials as at, and for the years ended, 31 December 2015, 2016,
and 2017:
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Year ended 31 December
2015 2016 2017
Gross Cash Profit (US$ ‘000) ........ 473,826 579,486 666,026
Retail ......................... 288,977 375,931 429,434
Commercial ..................... 137,848 144,687 161,601
Lubricants ..................... 47,001 58,868 74,991
Gross Cash Unit Margin (US$/ ‘000
litres) ............................. 58 67 71
Retail Fuel .................... 62 74 78
Commercial ..................... 40 42 44
Lubricants ..................... 464 488 581
EBITDA (US$ ‘000) ................... 232,977 286,042 326,092
Adjusted EBITDA (US$ ‘000) .......... 240,348 302,191 376,128
Retail ......................... 141,934 187,866 227,026
Commercial ..................... 76,356 82,201 106,978
Lubricants ..................... 22,058 32,124 42,124
Adjusted EBIT (US$ ‘000) ............ 165,735 212,821 291,950
Adjusted Net Income (US$ ‘000) ..... 74,313 108,866 170,592
Net Debt (US$ ‘000) ................ 90,494 (7,395) 366,454
Cash Conversion Margin .............. 82% 89% 88%
ROACE ............................... 15% 20% 28%
Notes
“Gross Cash Profit”: gross profit before depreciation and amortisation recognised in cost
of sales
“Gross Cash Unit Margin”: gross cash profit per unit (1,000 litres), excluding non-fuel retail
“EBITDA”: profit before financing expense, financing income, income taxes and
depreciation and amortisation charges on property, plant and
equipment and intangible assets
“Adjusted EBITDA”: EBITDA before special items, being the impact of restructuring
charges and other exceptional items that are not considered to
represent the underlying operational performance
“Adjusted EBIT”: profit before finance expense, finance income, income taxes and
special items
“Net Debt”: total borrowings and lease liabilities less cash and cash equivalents
“Cash Conversion Margin”: Adjusted EBITDA less maintenance capital expenditure divided by
Adjusted EBITDA
“ROACE”: Adjusted EBIT after tax divided by average capital employed. Also
called Return on Invested Capital (ROIC)
“Capital Employed”: net assets plus borrowings and lease liabilities minus cash and cash
equivalents
Board of Directors
John Daly, Chairman Elect
- Chairman of Britvic plc, Non-Executive Director of Ferguson
plc and Non-Executive Director and Chair of the remuneration
committee of G4S plc.
- Held various executive leadership positions over 20 years at
British American Tobacco plc, most recently as Chief Operating
Officer from 2010-14.
- Based in London and graduated with an MBA from University
College Dublin.
Christian Chammas, Chief Executive Officer
- Appointed Chief Executive Officer in January 2012.
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- Extensive experience in the energy sector with a deep
knowledge of Africa and emerging markets.
- Prior to joining the Group, held several executive positions
in a 31-year career at Total, including Chief Executive
Officer for the Total group of companies in Nigeria, Cameroon
and Kenya, and Executive Vice President for the Middle East
and North Africa division of Total’s refining and marketing
division.
- Based in London, but spends the majority of his time with
employees, customers and other key stakeholders in the Group’s
businesses across Africa. Graduated with a degree in Civil
Engineering.
Johan Depraetere, Chief Financial Officer
- Has been the Chief Financial Officer for Vivo Energy since
joining in April 2012.
- Previously worked for the Samsung Group in Korea for nine
years. Has also held roles at McKinsey and Morgan Stanley.
- Based in London and graduated with an MBA from Harvard
University.
Javed Ahmed, Non-Executive Director Elect
- Has been a supervisory board member of VEH, the current
holding company of the Group, since 2011.
- Joined Vitol in 2009 and currently holds positions at a number
of Vitol’s portfolio companies, including as a board member
for Petrol Ofisi, VTTI, Viva Energy Australia, VPI Holding and
OVH Energy. Prior to Vitol he spent 12 years with Morgan
Stanley’s commodities group.
- Based in London and has a BA in Economics and Mathematics from
Yale University and a JD/MBA from Harvard University.
Temitope Lawani, Non-Executive Director Elect
- Has been a supervisory board member of VEH since 2011.
- Co-founder and Managing Partner of Helios Investment Partners,
an Africa-focused private investment firm. He serves on the
board of directors of Helios Towers, Bayport Management
Limited, Mall for Africa, Off Grid Electric, OVH Energy, and
Axxela. He also serves as a member of the Harvard Law School
Dean’s Advisory Board, the MIT School of Engineering Dean’s
Advisory Council, and on the boards of directors for the
Emerging Markets Private Equity Association and The END Fund.
- Received a BS in Chemical Engineering from the Massachusetts
Institute of Technology and a JD (cum laude)/MBA from Harvard
University.
Carol Arrowsmith, Independent Non-Executive Director Elect
- Non-Executive Director of Compass Group plc and Chair of its
remuneration committee, Director and Trustee of Northern
Ballet Limited and a member of the Advisory Group for Spencer
Stuart.
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- Former Vice-Chair and Senior Partner of Deloitte LLP. She has
advised boards of directors on executive remuneration across a
range of sectors for over 20 years.
- Based in the UK and Australia. Has a degree in Psychology from
the University of Newcastle-upon-Tyne and an MA in Business
Studies from the University of Sheffield.
Thembalihle Hixonia Nyasulu, Independent Non-Executive Director
Elect
- Non-Executive Director for Unilever plc from 2007-16. Non-
Executive Director and subsequently Chair of Sasol Ltd between
2006-13.
- Also served on the boards of Anglo Platinum Ltd, the
Development Bank of Southern Africa, was Vice-Chair of Nedbank
and as a member of the J.P. Morgan Advisory Board for South
Africa.
- Has degrees in Social Work and Psychology from the University
of Zululand. Has also completed programmes at the IMD in
Lausanne and the Arthur D. Little Management Institute in
Cambridge, Massachusetts.
Enquiries
Media Enquiries
Tulchan Communications LLP +44 20 7353 4200
- Martin Robinson, Toby Bates
Joint Global Co-ordinators, Joint Bookrunners and Joint Sponsors
Sponsor, Joint Global Co-ordinator and Joint Bookrunner
J.P. Morgan Securities plc +44 20 7742 4000
- James Janoskey, Barry Meyers, Virginia
Khoo
JSE Sponsor
J.P. Morgan Equities South Africa +27 11 507 0300
Proprietary Limited
- Paul H. van Zijl
Joint Global Co-ordinators and Joint Bookrunners
Citigroup Global Markets Limited +44 20 7986 4000
- Miguel Azevedo, Hamza Girach, Patrick
Evans +44 20 7888 8888
Credit Suisse Securities (Europe) Limited
- Nick Koemtzopoulos, Stephane Gruffat,
Chris Ennals
Joint Bookrunners
BNP Paribas +44 20 7595 2066
Rand Merchant Bank, a division of FirstRand +27 11 282 8000
Bank Limited
The Standard Bank of South Africa Limited +44 20 3145 5000
9
FURTHER INFORMATION ABOUT VIVO ENERGY AND THE OFFER
Investment highlights in more detail
Market: compelling African consumer fundamentals
Vivo Energy operates across Africa where there are favourable macro
trends driving the Group’s growth, including strong population
growth, rapid urbanisation, a growing middle class and a young
population. It is projected that by 2050 there will be 1.2 billion
more people in Africa[7], representing more than 65% of global
population growth[8], and that Africa’s urban population will increase
from 40% in 2015 to 56% in 2050[9].
It is also projected that by 2030 the middle class in Africa will
grow to 582 million people from 376 million people in 2013[10]. The
median age in Africa is 19 compared to 30 in Asia and 38 in the
United States, as at 31 December 2015[11], making Africa the world’s
youngest continent.
These macro trends support, either directly or indirectly, the
growing revenues of the Group. Other macro trends include robust
infrastructure development, with US$150 billion in infrastructure
spending required by 2025[12]. A further trend is rapid vehicle growth,
with the number of vehicles growing at a CAGR of 7% from 2016-21[13].
As at 31 December 2017 there were 33 vehicles per 1,000 people in
Africa, compared to 560 in Europe and 814 in the United States[14].
In particular, on average in Vivo Energy’s 15 retail countries,
strong GDP growth is expected from 2018-21 and the Directors believe
this will result in opportunities for the Group on the basis that
consumption is linked to GDP per capita.
In the year ended 31 December 2017, the Group’s extensive retail
platform enabled the Group to have access to 277 million consumers
in Africa[15]. The Directors believe that these positive macro trends,
combined with attractive industry and market dynamics, have driven
and will continue to drive the Group’s business in Africa.
Platform: pan-African footprint, market-leading number one brand
The Group has a pan-African footprint, operating and marketing its
products in countries across North, West, East and Southern Africa
that together represent 23% of Africa’s population[16]. The Group has a
network of more than 1,800 service stations in 15 countries and
exports lubricants to more than ten other African countries.
[7] Source: UN World Population Prospects 2017 (compared to 2015 population)
[8] Source: UN World Population Prospects 2017 (data as of 2015)
[9] Source: UN World Population Prospects 2017 (data as of 2015)
[10] Source: McKinsey
[11] Source: UN World Population Prospects 2017 (data as of 2015)
[12] Source: McKinsey
[13] Source: BMI (includes motorbikes)
[14] Source: BMI and WHO estimates (includes motorbikes)
[15] Source: UN World Population Prospects 2017 (data as of 2015)
[16] Source: UN World Population Prospects 2017 (data as of 2015)
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Vivo Energy is the number one or number two market leader by fuel
volumes sold in 14 of those 15 operating countries as of 31 December
2017, with the Group’s overall market share ranging from 14% to 46%
in each country (based on the market share across all business
segments)[17].
The Group makes full use of the globally respected Shell brand,
which is the most preferred fuel brand for consumers across the
Group’s markets, with a brand preference rating of 52% as of
September 2017[18]. Brand remains a critical factor in consumers’
choice of fuel, as consumers value the certainty of product
performance and quality, particularly in African markets where
counterfeit, adulterated or contaminated fuel can be prevalent.
When the Group rebrands an existing service station as a Shell
service station, consumers have access to a range of differentiated
Shell-branded fuels and lubricants and product innovation, which the
Directors believe drives higher volumes and margins for the Group.
The Directors believe that since the Group was carved out of Shell’s
African operations in 2011, it has capitalised on the value of the
Shell brand and enhanced the brand preference with consumers.
Business model: integrated, entrepreneurial and performance-driven
Vivo Energy operates an integrated marketing, distribution and
retail model. The Group owns or operationally controls critical
supply infrastructure that provides the Group with a sustained
competitive advantage. The Group manages the supply chain of the
fuels and lubricants it sells from procuring fuels, LPG and
lubricants from an international network of suppliers through to
sales to the end-customer. Once procured, the Group then distributes
its products across its African network, using the storage
facilities the Group owns or has access to.
As at 31 December 2017, Vivo Energy owned or had access to
approximately 943,000 cubic metres of fuel storage capacity in 97
locations across 14 countries, which provided fuel to more than 1,800
service stations and around 5,000 commercial customers. Through
carefully selected and managed transporters, each of which is required
to comply with the Group’s HSSE policies and procedures, an average
of approximately 156,000 kilometres were driven on a daily basis in
the year ended 31 December 2017 to deliver the Group’s products to
its geographically diverse sites.
This storage and distribution network enabled the Group to sell
approximately 5.2 billion litres of fuel and lubricants to Retail
customers and 3.8 billion litres of fuel and lubricants to Commercial
customers in the year ended 31 December 2017. The Group’s lubricants
supply was brought under greater control of the Group through the
acquisition of 50% of SVL, which sources, blends and supplies Shell-
branded lubricants, in December 2017.
[17] Source: CITAC
[18] Source: Ipsos Global Brand Tracker (Q3 2017)
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Growth: organic and inorganic across fuel, convenience retail and
quick service restaurants
Vivo Energy has seen strong growth in fuel volumes in recent years,
which the Directors believe has been driven by macro fundamentals as
well as the Group’s operational excellence initiatives.
In Retail, the Group has achieved volume and margin growth through
operational excellence initiatives including dealer management, the
launch of new and premium fuels, promotions and loyalty cards as
well as Shell fleet and prepaid cards. Vivo Energy has also been
successfully executing its retail portfolio growth strategy,
capturing unrealised opportunities in the countries in which the
Group operates. From 2015-17, the Group succeeded in opening a new
service station every three days.
The Directors believe there remain significant growth opportunities
across Africa, and the Group plans to continue to increase its total
number of service stations and deliver volume growth. In Vivo
Energy’s countries of operation, the Group estimates that there are
on average 50 service stations per million people, compared to 71 in
China and 129 in the United Kingdom[19]. The Group plans to add
approximately 400 more service stations by the end of 2022, bringing
the total number of service stations to more than 2,200.
The Group has also invested in non-fuel offerings, including
convenience retail shops, quick service and fast casual restaurants,
pharmacies and other services, bringing premium well-known brands to
its operations, such as KFC, Burger King, Subway, Brioche Dorée and
Pizza Hut, as well as regional brands such as Java House. Some of
these were the first of the respective franchise chains to be opened
in the country.
The Directors believe that non-fuel retail unlocks a new earnings
stream for the Group while creating consumer retail hubs which
support the Group’s sale of fuels. The benefits of non-fuel outlets
to the Group include additional earnings with fixed rent and share
of revenue, higher fuel volumes and the building of customer loyalty
from both necessity and impulse purchases.
In the Commercial segment, the Group optimises gross margin and
credit exposure, leverages its integrated infrastructure, develops
and improves the respective customer value propositions and
continuously and selectively seeks new business. In Lubricants, the
Group is active in its selling initiatives on forecourts to increase
its lubricants sales and cross sells with fuel to key commercial
sectors and offers technical support and services in this segment.
The Group is well-positioned to benefit from future consolidation
opportunities in its markets, and in many African markets
acquisitions are the preferred route of entry to achieve scale. Most
recently, on 4 December 2017, the Group entered into an agreement
(subject to regulatory approval) to acquire Engen International
Holdings (Mauritius) Limited, an investment holding company that
[19] Population based on UN World Population Prospects 2017 (data as of 2015). Number
of service stations based on Company estimates
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holds the retail and marketing oil and gas operations of Engen
Holdings (Pty) Limited in ten countries in Africa (Democratic
Republic of Congo, Gabon, Kenya, Malawi, Mozambique, Reunion,
Rwanda, Tanzania, Zambia and Zimbabwe).
The Group views the Engen Transaction as an opportunity to replicate
the Group’s growth model. The Engen Transaction will increase the
Group’s target market from approximately 277 million to around half
a billion people (being 42% of Africa’s total population)[20] and will
allow access to countries identified by the Group as high priority,
further enhancing the Group’s geographical diversification.
The Engen Transaction will add nine new retail countries and over
300 additional service stations to the Group’s network. The Group
aims to import its operational excellence to the transitioning Engen
operations and to implement key processes and systems for continued
growth, including opening over 100 additional new sites by 2022. In
addition to the Engen Transaction, the Group aims to target other
acquisitions which might provide similar opportunities.
Financial model: resilient, strong earnings and high returns
The Directors believe that the Group’s financial performance is
based on resilient unit margins, diversification, operating
leverage, disciplined capital allocation and high cash conversion.
The Group has seen growth in Adjusted EBITDA and an increase in
ROACE, with Adjusted EBITDA increasing at a CAGR of 25% and ROACE
improving from 15% in 2015 to 28% in 2017.
Vivo Energy’s gross cash unit margin was US$58, US$67 and US$71 per
thousand litres, respectively, in the years ended 31 December 2015,
2016 and 2017. Despite fluctuations in currency and the price of
crude oil, this remained relatively stable due to price regulation
in most of the countries in which the Group operates, as well as
measures the Group put in place to protect margins.
The Group is diversified geographically with 41.3% of its service
stations in West Africa, 27.0% in North Africa and 31.7% in East and
Southern Africa as of 31 December 2017. In terms of EBITDA, in 2017,
12 out of its 15 retail countries generated over US$10 million each.
The Group is also diversified among its three segments with the
Retail, Commercial and Lubricants segments accounting for 60.4%,
28.4% and 11.2% of Adjusted EBITDA, respectively, in the year ended
31 December 2017. In addition, in the year ended 31 December 2017,
61% of the Group’s Adjusted EBITDA was from currencies pegged to the
US dollar or Euro.
The Group maintains significant operating leverage. From 2015-17,
the Group experienced growth in volumes at a CAGR of 6%, in gross
cash profit of 19%, in Adjusted EBITDA of 25% and in Adjusted Net
Income of 52%. Vivo Energy also has a disciplined approach to
capital allocation and management, including rigorous return
requirements for investments with a minimum internal rates of return
[20] UN World Population Prospects 2017 (data as of 2015)
13
(20% for Retail projects and 25% for Commercial projects), ensuring
strong cash returns for the Group.
The Group incentivises management of its operating country entities
to increase return on capital by linking compensation with returns,
with long-term incentive plans being linked to ROACE, and linking
35% of the operating entity’s performance scorecard to ROACE
drivers. The Group has experienced high and increasing ROACE of 15%,
20% and 28% in the years ended 31 December 2015, 2016 and 2017,
respectively.
Vivo Energy operates with high cash conversion and low financial
leverage. For the years ended 31 December 2015, 2016 and 2017, the
Group maintained a Cash Conversion Margin of 82%, 89% and 88%,
respectively. The Group’s financial leverage was 0.38x, (0.02)x, and
0.97x during the same periods. The Group also has structurally
negative working capital, with retail payments being made on average
six days after delivery and creditors operating on longer terms.
The Group’s strong financial model has enabled the Group to self-
fund its investment in its business to deliver further efficiencies
and strengthen its market positions.
Vivo Energy’s history
‘A new 100 year old company’
- 2011 - Carve out from Shell
- 2012 - New executives, organisational structure, system and
controls
- 2013 - Fuel station growth capex plan
- 2014 - Convenience retail and QSR re-design and expansion
- 2015 - Lubricants optimisation
- 2016 - New 15-year brand licence agreed with Shell
- 2017 - Acquisition of 50% of SVL
- 2017 - Announced acquisition of 300+ Engen service stations in
nine new countries (subject to regulatory approval, targeted
for completion in the third quarter of 2018)
Vivo Energy’s strategy
1. Remain a responsible and respected business
From the outset, Vivo Energy’s vision has been to become Africa’s
most respected energy business. This means doing business the right
way, putting safety first and making a positive contribution to its
communities.
Vivo Energy’s robust and effective governance is designed to ensure
that it does not compromise the way it operates as it invests and
grows its business.
14
2. Preserve the Group’s lean and agile organisation and performance-
driven culture
Vivo Energy’s organisation is customer-centric with empowered
country teams and lean central support functions. The Group’s speed
of decision-making and agility is central to its competitive
position.
Vivo Energy intends to preserve this organisational structure and to
continue to incentivise its employees to grow the business,
profitably and safely.
3. Maximise value of the Group’s existing businesses
Vivo Energy intends to maximise the value of its existing businesses
by continuing to innovate, offering its customers differentiated,
recognised and innovative fuel and non-fuel products and services
under multiple premium global brands.
Vivo Energy will use its broad geographic footprint, integrated
business model and well-invested asset base (in both storage and
retail) to grow its competitive advantage and increase
profitability. The Group will continue to invest in its retail
network as a stable growth platform and to serve its customers in
commercial and lubricants across a whole range of industries in
Africa.
4. Pursue value accretive growth
Vivo Energy plans to expand and develop its retail network in
existing markets by building new service stations, acquiring new
sites and upgrading existing retail service stations to fulfil
unrealised potential.
The Group is committed to enhancing its high-quality fuel and
lubricants offering by improving its non-fuel, consumer product and
services through partnerships with respected leading brands.
In December 2017, the Group signed a share transaction agreement
with Engen which will add nine new retail countries and more than
300 new retail service stations (subject to regulatory approval,
targeted for completion in the third quarter of 2018).
5. Maintain attractive and sustainable returns through disciplined
financial management
Vivo Energy’s strong financial and operational track record of
volume and EBITDA growth, cash generation and disciplined capital
expenditure is underpinned by a robust financial controls framework
and comprehensive internal audit process with strict credit and
currency exposure management.
The Group intends to maximise return on capital employed and to
maintain profit margins by focusing on disciplined capital
allocation and incentivising country management to deliver
profitable growth, supported by a resilient, well-diversified
business across Africa. The Group plans to continue to maintain a
sustainable capital structure to maximise total shareholder returns
and to continue to drive sustainable growth.
15
Important notice
The contents of this announcement, which has been prepared by and is the sole
responsibility of the Company, have been approved for the purposes of section 21 of
the Financial Services and Markets Act 2000 as amended (the “FSMA”) by J.P. Morgan
Securities plc (which conducts its United Kingdom investment banking activities as
J.P. Morgan Cazenove) (“J.P. Morgan”).
Each of Citigroup Global Markets Limited (“Citigroup”), Credit Suisse Securities
(Europe) Limited (“Credit Suisse”) and J.P. Morgan, which are authorised by the
Prudential Regulation Authority (the “PRA”) and regulated by the FCA and the PRA in
the United Kingdom, BNP PARIBAS (“BNP Paribas”), which is supervised by the
European Central Bank (the “ECB”) and the Autorité de Contrôle Prudentiel et de
Résolution (the “ACPR”) (and its London Branch is authorised by the ECB, the ACPR
and the PRA and subject to limited regulation by the FCA and the PRA), Rand
Merchant Bank, a division of FirstRand Bank Limited (“RMB”), which is regulated by
the South African Reserve Bank (the “SARB”) and the Financial Services Board (the
“FSB”), The Standard Bank of South Africa Limited (“Standard Bank”), which is
regulated by the SARB and J.P. Morgan Equities South Africa Proprietary Limited
(“JPM SA”), which is regulated by the JSE (together with Citigroup, Credit Suisse,
J.P. Morgan, BNP Paribas, RMB and Standard Bank, the “Banks”), are acting
exclusively for the Company and no-one else in connection with the Offer and will
not regard any other person (whether or not a recipient of this announcement) as
their respective clients in relation to the Offer and will not be responsible to
anyone other than the Company for providing the protections afforded to their
respective clients nor for giving advice in relation to the Offer, the contents of
this announcement or any transaction, arrangement or other matter referred to
herein.
This announcement is not for publication or distribution, directly or indirectly,
in or into or from Australia, Canada, Japan or the United States (including its
territories and possessions, any State of the United States and the District of
Columbia) or any jurisdiction where to do so would constitute a violation of the
relevant laws of such jurisdiction. The distribution of this announcement may be
restricted by law in certain jurisdictions and persons into whose possession any
document or other information referred to herein comes should inform themselves
about and observe any such restriction. Any failure to comply with these
restrictions may constitute a violation of the securities laws of any such
jurisdiction.
This announcement does not contain or constitute an offer of, or the solicitation
of an offer to buy, securities to any person in Australia, Canada, Japan or the
United States or in any jurisdiction to whom or in which such offer or solicitation
is unlawful. The securities referred to herein may not be offered or sold in the
United States absent registration under the US Securities Act of 1933, as amended
(the “Securities Act”) or another exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act. Subject to certain
exceptions, the securities referred to herein may not be offered or sold in
Australia, Canada or Japan or to, or for the account or benefit of, any national,
resident or citizen of Australia, Canada or Japan. The offer and sale of the
securities referred to herein has not been and will not be registered under the
Securities Act or under the applicable securities laws of Australia, Canada or
Japan. There will be no public offer of the securities in the United States.
In member states of the European Economic Area (each, a “Relevant Member State”),
this announcement and any offer if made subsequently is addressed and directed only
at persons who are “qualified investors” within the meaning of the Prospectus
Directive (“Qualified Investors”). For these purposes, the expression “Prospectus
Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010
PD Amending Directive, to the extent implemented in a Relevant Member State), and
includes any relevant implementing measure in the Relevant Member State and the
expression “2010 PD Amending Directive” means Directive 2010/73/EU. In the United
16
Kingdom this announcement is directed exclusively at Qualified Investors (i) who
have professional experience in matters relating to investments falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005, as amended (the “Order”), or (ii) who fall within Article 49(2)(A) to
(D) of the Order, and (iii) to whom it may otherwise lawfully be communicated, and
any investment activity to which it relates will only be engaged in with such
persons and it should not be relied on by anyone other than such persons.
This announcement does not constitute or form a part of, any offer or invitation to
sell, or issue or any solicitation of any offer or advertisement to purchase and/or
subscribe for, Shares or any other securities of the Company in South Africa,
including an offer to the public (as defined in the South African Companies Act No.
71 of 2008 (“South African Companies Act”), as amended) for the sale of, or
subscription for, or the solicitation of an offer to buy and/or subscribe for,
Shares and will not be distributed to any person in South Africa in any manner that
could be construed as an offer to the public in terms of the South African
Companies Act. In South Africa, this announcement is directed only at (i) selected
persons falling within one of the specified categories set out in section 96(1)(a)
of the South African Companies Act or (ii) selected persons who acquire, as
principal, for Shares at a minimum aggregate acquisition price of R1 000 000, as
envisaged in section 96(1)(b), of the South African Companies Act (all such persons
in (i) and (ii) being referred to as “relevant persons”), and to whom the Offer
will specifically be addressed, and only by whom the Offer will be capable of
acceptance. The Offer and any other investment activity to which this announcement
relates will only be available to, and will only be engaged with, relevant persons.
Any person who is not a relevant person should not act on this announcement or any
of its contents. This announcement does not, nor does it intend to, constitute a
“registered prospectus” or “advertisement”, as contemplated by the South African
Companies Act and no prospectus has been, or will be, filed with the South African
Companies and Intellectual Property Commission.
The information contained in this announcement constitutes factual information as
contemplated in section 1(3)(a) of the South African Financial Advisory and
Intermediary Services Act, 37 of 2002 (the “FAIS Act”), as amended and should not
be construed as an express or implied recommendation, guide or proposal that any
particular transaction in respect of the Shares or in relation to the business or
future investments of the Company is appropriate to the particular investment
objectives, financial situations or needs of a prospective investor, and nothing in
this announcement should be construed as constituting the canvassing for, or
marketing or advertising of, financial services in South Africa. The Company is not
a financial services provider as such term is defined in the FAIS Act.
This announcement is an advertisement and not a prospectus and investors should not
purchase any Shares referred to in this announcement except on the basis of
information in the Prospectus. Copies of the Prospectus will, following
publication, be available from the Company’s registered office at 3rd Floor, Atlas
House, 173 Victoria Street, London, SW1E 5NA, United Kingdom and on the Company’s
website at http://investors.vivoenergy.com. Any purchase of Shares in the proposed
Offer should be made solely on the basis of the information contained in the final
Prospectus to be issued by the Company in connection with the Offer. Before
investing in the Shares, persons viewing this announcement should ensure that they
fully understand and accept the risks which will be set out in the Prospectus when
published. The information in this announcement is for background purposes only and
does not purport to be full or complete. No reliance may be placed for any purpose
on the information contained in this announcement or its accuracy or completeness.
This announcement does not constitute or form part of any offer or invitation to
sell or issue, or any solicitation of any offer to purchase or subscribe for any
Shares or any other securities nor shall it (or any part of it) or the fact of its
distribution, form the basis of, or be relied on in connection with, any contract
therefor. The information in this announcement is subject to change. Information in
this announcement or any of the documents relating to the Offer cannot be relied
upon as a guide to future performance. The price and value of securities may go up
as well as down. Persons needing advice should contact a professional adviser.
17
This announcement includes forward-looking statements, which are based on current
expectations and projections about future events. These statements may include,
without limitation, any statements preceded by, followed by or including words such
as “target”, “believe”, “expect”, “aim”, “intend”, “may”, “anticipate”, “estimate”,
“plan”, “project”, “will”, “can have”, “likely”, “should”, “would”, “could” and
other words and terms of similar meaning or the negative thereof. Forward-looking
statements may and often do differ materially from actual results. These forward-
looking statements are subject to risks, uncertainties and assumptions about the
Company and its subsidiaries and investments, including, among other things, the
development of its business, trends in its operating industry, and future capital
expenditures and acquisitions. By their nature, forward-looking statements involve
risk and uncertainty because they relate to future events and circumstances. Any
forward-looking statements reflect the Company’s current view with respect to
future events and are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Group’s business, results of
operations, financial position, prospectus, growth or strategies and the industry
in which it operates. Save as required by law or by the Listing Rules of the FCA,
each of the Company, the Banks and their respective affiliates, as defined in Rule
501(b) of Regulation D of the U.S. Securities Act 1933, as amended, (“Affiliates”)
expressly disclaims any obligation or undertaking to update, review or revise any
forward-looking statement contained in this announcement whether as a result of new
information, future developments or otherwise. Forward-looking statements speak
only as of the date they are made.
The timetable, including the date of Admission, may be influenced by a range of
circumstances such as market conditions. There is no guarantee that Admission will
occur and you should not base your financial decisions on the Company’s intentions
in relation to Admission at this stage. Acquiring investments to which this
announcement relates may expose an investor to a significant risk of losing all of
the amount invested. Persons considering making such investments should consult an
authorised person specialising in advising on such investments. This announcement
does not constitute a recommendation concerning the Offer. The value of the Shares
can decrease as well as increase. Potential investors should consult a professional
advisor as to the suitability of the Offer for the person concerned.
In connection with the Offer of the Shares, each of the Banks and any of their
Affiliates, acting as investors for their own accounts, may take up a portion of
the Shares in the Offer as a principal position and in that capacity may retain,
purchase, sell, offer to sell or otherwise deal for their own accounts in such
Shares and other securities of the Company or related investments in connection
with the Offer or otherwise. Accordingly, references in the Prospectus, once
published, to the Shares being offered, acquired, placed or otherwise dealt in
should be read as including any offer to, acquisition, placing or dealing by, the
Banks and any of their Affiliates acting in such capacity. In addition, the banks
and any of their Affiliates may enter into financing arrangements (including swaps
or contracts for differences) with investors in connection with which the Banks and
any of their Affiliates may from time to time acquire, hold or dispose of Shares.
The Banks do not intend to disclose the extent of any such investment or
transactions otherwise than in accordance with any legal or regulatory obligations
to do so.
None of the Banks nor any of their respective Affiliates or any of their respective
directors, officers, employees, advisers or agents accepts any responsibility or
liability whatsoever for or makes any representation or warranty, express or
implied, as to the truth, accuracy or completeness of the information in this
announcement (or whether any information has been omitted from the announcement) or
any other statement made or purported to be made by it, or on its behalf, in
connection with the Company, the Shares or the Offer or any other information
relating to the Group whether written, oral or in a visual or electronic form, and
howsoever transmitted or made available or for any loss howsoever arising from any
use of this announcement or its contents or otherwise arising in connection
therewith. Each of the Banks and each of their respective Affiliates accordingly
disclaim, to the fullest extent permitted by applicable law, all and any liability
whether arising in tort, contract or otherwise which they might otherwise be found
18
to have in respect of this announcement or any such statement or information. No
representation or warranty express or implied, is made by any of the Banks or any
of their respective Affiliates as to the accuracy, completeness, verification or
sufficiency of the information set out in this announcement, and nothing in this
announcement will be relied upon as a promise or representation in this respect,
whether or not to the past or future.
In connection with the Offer, J.P. Morgan and JPM SA, as “Stabilising Managers”, or
any of their agents, may (but will be under no obligation to), to the extent
permitted by applicable law, over-allot Shares or effect other stabilisation
transactions with a view to supporting the market price of the Shares at a higher
level than that which might otherwise prevail in the open market. The Stabilising
Managers are not required to enter into such transactions and such transactions may
be effected on any securities market, over-the-counter market, stock exchange or
otherwise and may be undertaken at any time during the period commencing on the
date of the commencement of conditional dealings of the Shares on the LSE and the
JSE and ending no later than 30 calendar days thereafter. However, there will be no
obligation on the Stabilising Managers or any of their agents to effect stabilising
transactions and there is no assurance that stabilising transactions will be
undertaken. Such stabilisation, if commenced, may be discontinued at any time
without prior notice. Except as required by law or regulation, neither of the
Stabilising Managers nor any of their agents intends to disclose the extent of any
over-allotments made and/or stabilisation transactions conducted in relation to the
Offer.
In connection with the Offer, the Stabilising Managers may, for stabilisation
purposes, over-allot Shares up to a maximum of 15% of the total number of Shares
comprised in the Offer. For the purposes of allowing the Stabilising Managers to
cover short positions resulting from any such overallotments and/or from sales of
Shares effected by it during the stabilising period, it is expected that the
Selling Shareholders will grant the Stabilising Managers the Over-allotment Option,
pursuant to which the Stabilising Managers may purchase or procure purchasers for
additional Shares at the Offer Price, which represents up to an additional 15% of
the Offer size (the “Over-allotment Shares”). The Over-allotment Option will be
exercisable in whole or in part, upon notice by the Stabilising Managers, at any
time on or before the 30th calendar day after the commencement of conditional
dealings of the Shares on the LSE and the JSE. Any Over-allotment Shares made
available pursuant to the Over-allotment Option will rank pari passu in all
respects with the Shares, including for all dividends and other distributions
declared, made or paid on the Shares, will be purchased on the same terms and
conditions as the Shares being issued or sold in the Offer and will form a single
class for all purposes with the other Shares. Where the context so requires,
references in this announcement to the Shares include Shares purchased pursuant to
the Over-allotment Option.
Information to Distributors
Solely for the purposes of the product governance requirements contained within:
(a) EU Directive 2014/65/EU on markets in financial instruments, as amended (“MiFID
II”); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593
supplementing MiFID II; and (c) local implementing measures (together, the “MiFID
II Product Governance Requirements”), and disclaiming all and any liability,
whether arising in tort, contract or otherwise, which any “manufacturer” (for the
purposes of the MiFID II Product Governance Requirements) may otherwise have with
respect thereto, the Shares have been subject to a product approval process, which
has determined that such Shares are: (i) compatible with an end target market of
retail investors and investors who meet the criteria of professional clients and
eligible counterparties, each as defined in MiFID II; and (ii) eligible for
distribution through all distribution channels as are permitted by MiFID II (the
“Target Market Assessment”). Notwithstanding the Target Market Assessment,
distributors should note that: the price of the Shares may decline and investors
could lose all or part of their investment; the Shares offer no guaranteed income
and no capital protection; and an investment in the Shares is compatible only with
investors who do not need a guaranteed income or capital protection, who (either
alone or in conjunction with an appropriate financial or other adviser) are capable
19
of evaluating the merits and risks of such an investment and who have sufficient
resources to be able to bear any losses that may result therefrom. The Target
Market Assessment is without prejudice to the requirements of any contractual,
legal or regulatory selling restrictions in relation to the Offer. Furthermore, it
is noted that, notwithstanding the Target Market Assessment, the Underwriters will
only procure investors who meet the criteria of professional clients and eligible
counterparties.
For the avoidance of doubt, the Target Market Assessment does not constitute: (a)
an assessment of suitability or appropriateness for the purposes of MiFID II; or
(b) a recommendation to any investor or group of investors to invest in, or
purchase, or take any other action whatsoever with respect to the Shares.
Each distributor is responsible for undertaking its own target market assessment in
respect of the Shares and determining appropriate distribution channels.
20
Date: 10/04/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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