Wrap Text
2020 Half Year Results
Vivo Energy plc
(Incorporated in England and Wales)
(Registration number: 11250655)
(Share code: VVO)
LEI: 213800TR7V9QN896AU56
ISIN: GB00BDGT2M75
This short form announcement is the responsibility of the Directors and represents only a summary of the
information contained in the full announcement. Consequently, it does not contain full or complete details. Any
investment decisions made by investors and/or shareholders should be based on consideration of the full
announcement as a whole and investors and/or shareholders are encouraged to review the full announcement.
The full announcement is accessible on the Company’s website at https://investors.vivoenergy.com/results-centre
and on the JSE website at https://senspdf.jse.co.za/documents/2020/jse/isse/VVOE/VivoHY20.pdf.
Copies of the full announcement may be requested by contacting Investor Relations at investors@vivoenergy.com.
28 July 2020
Vivo Energy plc
(LSE: VVO & JSE: VVO)
2020 Half Year Results
Vivo Energy plc, the pan-African retailer and marketer of Shell and Engen branded fuels and lubricants, today
announces its consolidated financial results for the six months ended 30 June 2020.
Christian Chammas, CEO of Vivo Energy plc, commented: “We are living in unprecedented times. My
thanks go out to all our teams for their efforts in staying safe whilst maintaining the essential provision of fuels
for our customers. We entered the COVID-19 pandemic in a position of strength and ended the period
cautiously optimistic, having seen a rebound in June in both volumes and margins from their April lows. We are
a resilient business, our business model remains unchanged and we continue to position ourselves for future
growth.”
KEY PERFORMANCE INDICATORS1
Six-month Six-month
period ended period ended
($ in millions), if not otherwise indicated 30 June 2020 30 June 2019 Change
Volumes (million litres) 4,618 4,985 -7%
Revenues 3,375 3,903 -14%
Gross Profit 261 318 -18%
Gross Cash Unit Margin ($/’000 litres) 65 70 -7%
Gross Cash Profit 300 351 -15%
EBITDA 136 200 -32%
Adjusted EBITDA 140 212 -34%
Net Income 13 72 -82%
Diluted EPS (US cents) 1 5 -88%
Adjusted Net Income 16 82 -80%
Adjusted Diluted EPS (US cents) 1 6 -85%
(1) Refer to the non-GAAP financial measures definitions and reconciliations to the most comparable IFRS measures pages 11 and
12 of the full announcement.
Financial Highlights
- Revenues decreased by 14% to $3,375 million (H1 2019: $3,903 million)
- Gross cash profit was lower at $300 million (H1 2019: $351 million) due to the impact of COVID-19
on both volumes and margins
- Volume sold fell 7%, as COVID-19 related restrictions on movement led to reduced demand
- Gross cash unit margin of $65 per thousand litres (H1 2019: $70), was impacted by negative inventory
effects of c.$3 per thousand litres
- Adjusted EBITDA was $140 million, with EBITDA of $136 million
- Net income decreased to $13 million (H1 2019: $72 million)
- Adjusted diluted EPS and diluted headline EPS were both 1 US cent (H1 2019 HEPS: 5 US cents)
- Net debt / adjusted EBITDA ratio increased to 1.19 x at 30 June 2020 (FY 2019: 0.48x)
Strategic and Operational Highlights
- Supported our employees, customers, and communities through a range of initiatives to mitigate the
impact of COVID-19
- Protected our business by reducing discretionary marketing spend, pausing uncommitted capex and
temporarily reducing supply of fuels
- Maintained safety focus, with Total Recordable Case Frequency (TRCF) of zero
- Expanded Retail footprint by a net total of 30 new retail service stations and 23 Non-fuel retail
offerings
- Finalising agreements to acquire several small dealer networks in Engen markets as well as new QSR
joint ventures
COVID-19
Africa Context
To date the reported health impact from COVID-19 in Africa has been limited, with around 5% of global cases
reported on the continent. Testing is not as extensive as in Europe or the US but the majority of the confirmed
cases are in African countries where we do not have operations. In late March and April, our host governments
moved quickly to impose a range of restrictions on movement to minimise the spread of the virus. As discussed
below, the strictest restrictions on movement are now slowly being relaxed, with our markets cautiously
reopening at different paces, and like many developed markets, looking to balance health and welfare with
economic stability and growth. The near-term impact continues to be unclear as it is likely that case numbers
will rise over the coming months, which may lead to further restrictions on mobility, but the long-term
macro-economic growth drivers on the continent remain unchanged. Our markets are resilient, and already
have experience of living through major health crises such as HIV and Ebola.
Our Stakeholders
Vivo Energy’s first priority has, and always will be, the health and safety of our people, our customers, and the
communities where we operate. We acted quickly and decisively, implementing a range of preventive and
protective health and safety measures. As a supplier of essential products in our markets, we maintained supply
at both our retail sites and to commercial customers. We have made sure the appropriate personal protective
equipment is available and put in place stringent additional screening, cleaning procedures and facilities at our
sites and depots to limit the risk of infection. We have also worked closely with our dealer network and our
transporters to protect the jobs of the front line staff employed by them and worked constructively with our
supply chain to adapt to the changes in demand.
We have also extensively supported our non-customer facing teams through the transition to remote working,
with many working from home for the first time. We ensured they have the right equipment, access and training
to remain safe, motivated and connected to the organisation and are undertaking regular virtual training and
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engagements. We will look to re-integrate our workforce into offices in a safe and socially distanced manner
where this is possible and desirable over the coming months.
During this period, we have not made any redundancies or taken government support in respect of furloughing
or comparator schemes.
We recognise our position within our emerging economies and have supported or led over 70 projects across
our 23 markets to help our communities, host governments and local partners mitigate the impact of the
pandemic during H1 2020.
H1 Review
In light of the restrictions imposed due to COVID-19, we have delivered robust H1 results. We started the year
strongly, with January and February delivering over 20% gross cash profit growth, before COVID-19 related
restrictions significantly affected gross cash profit in March and for the majority of Q2. Following the easing of
many restrictions, we saw a strong recovery in June, with gross cash profit for the month down 5% compared
to the previous year, with volumes and margins recovering well. These volatile trading conditions resulted in
H1 2020 gross cash profit of $300 million, of which 60% was generated in Q1 2020, compared to $351 million
in H1 2019.
After a strong start to the year, volumes sold in H1 were 7% lower than the previous period due to countries
imposing significant mobility restrictions in late March and early April, including full lockdowns in some markets.
As fuel is a critical resource, our retail sites remained open and we continued to supply our commercial
customers, however, volumes fell in April by nearly 40% against the previous year, with certain countries seeing
volumes fall by over 70%. Aviation and Retail fuels were the most affected businesses, with LPG and mining
experiencing resilient performance through the period. As we moved through May and June we saw a progressive
easing of measures, and at period-end, all of the full lockdowns had been lifted, with countries keeping a range
of lighter and targeted restrictions in place. As a result, in June, volumes were less than 5% lower than the
previous year, albeit still well behind expectations.
In normal market conditions, unit margins are not linked to either volumes or the oil price. However, H1 2020
unit margins of $65 per thousand litres were impacted by the unprecedented drop in demand from the mobility
restrictions, leading to a temporary increase in inventories, which then had to be written down to reflect the
significantly lower oil price environment at the time. We also took action to reduce inventory levels by making
targeted sales of excess stock at lower margins. Together, these actions affected unit margins by approximately
$3 per thousand litres, representing a c.$15 million impact on gross cash profit. In June, unit margins improved
and were in line with expectations and the previous year period.
Due to the operational leverage within the business, the lower gross cash profit had a significant impact on the
Group’s profitability, with the majority of our operating costs fixed in nature. In addition, due to the timing of
the Engen acquisition in 2019, we incurred two months of additional general and administrative cost in the
period, and increased our community spending. This resulted in adjusted EBITDA falling to $140 million,
compared to $212 million in H1 2019, and adjusted net income falling to $16 million. Earnings per share
amounted to 1 US cent, compared to 5 US cents in H1 2019.
During H1 2020, we saw the tangible benefits of our lean, de-centralised operational model and our investment
in IT infrastructure as we took rapid, coordinated action to stabilise our business and support our teams in
managing our stock levels, working capital and credit exposures. We also took the decision to slow non-essential
capital expenditure, with H1 capex of $45 million down 10% on H1 2019.
Balance Sheet and Liquidity
We maintained a strong balance sheet through this uncertain period, ending the half-year with a net debt to
adjusted EBITDA ratio of 1.19 times.
Net debt increased by $218 million to $426 million during the period, due to fluctuations in working capital,
which is funded at the operating country level through uncommitted short-term local financing. Approximately
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$111 million of this related to the timing of payments disclosed in our FY 2019 results that benefited the year-end
2019 position and reversed in Q1 2020.
In order to manage our working capital, we worked with our supply chain to cancel or defer around 75% of
supply due in May, which, together with an increase in demand has meant that inventory days have largely
returned to normal levels at period-end, with average inventory days in H1 2020 of 31 compared to 24 in
FY 2019. These actions supported a significant improvement in our working capital in June.
Our long-term debt sits at the holding company and increased by $73 million during the period, as the Group
took the precaution of drawing an additional $110 million on our revolving credit facility to provide flexibility.
This was partially offset by the payment of $41 million due under our amortising loan out of existing cash
resources. The full $110 million remains on our balance sheet. The Group continues to maintain sufficient
headroom under its financial covenants attached to its long-term debt.
We have also closely managed our credit exposures during the period and took rapid action early in the
pandemic to identify and monitor key risks, such as in the Aviation sector. We saw elevated levels of overdue
accounts early in the pandemic and are working closely with customers to support them with their payments.
Morocco Conseil de la Concurrence
As previously announced, there is an ongoing review by the Conseil de la Concurrence (‘the CdC’) of the
competitive dynamics of the Moroccan fuel retailing industry. There was a private hearing last week in Morocco
in relation to the review, and the CdC will arrive at their conclusions in due course. Management believes that
Vivo Energy Morocco has at all times conducted its operations in accordance with applicable competition laws,
rules and regulations.
Dividend
Given the impact of COVID-19 on the business in Q2 2020 the Board withdrew its recommendation to pay a
final dividend for 2019. The Board recognises the importance of dividends to shareholders, and, if the
improvement in trading continues, intends to restart dividend payments later in the year. The interim dividend
for 2019 was 1.1 US cents per share.
Outlook
On 25 March, the Group withdrew guidance for the year in light of the uncertainty arising from COVID-19 and
the actions taken by host governments to stem the spread of the virus. While we are encouraged by the
improvement in trading in June, and trading to date in July, and believe it may be sustained, we remain cautious.
Increased infection rates may delay further relaxation of measures, or lead to targeted new measures in certain
countries, with the potential knock-on impact on mobility. Given the ongoing level of uncertainty, the Board
does not yet believe it is appropriate to provide updated guidance.
End
Results presentation
Vivo Energy plc will host an audio webcast for analysts and investors today, 28 July 2020 at 09.30 BST, which
can be accessed at https://webcasting.brrmedia.co.uk/broadcast/5f0c6d4a4c167c1215795b78
Participants may also dial in to the event by conference call:
Dial-in: +44 330 336 9125 / +27 11 844 6054
Participant access code: 7192786
The replay of the webcast will be available after the event at https://investors.vivoenergy.com
Media contacts: Investor contact:
Vivo Energy plc Vivo Energy plc
Rob Foyle, Head of Communications Giles Blackham, Head of Investor Relations
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+44 7715 036 407 +44 20 3034 3735 /+ 44 7714 134 681
rob.foyle@vivoenergy.com giles.blackham@vivoenergy.com
Tulchan Communications LLP
Martin Robinson, Suniti Chauhan
+44 20 7353 4200
vivoenergy@tulchangroup.com
Notes to editors:
Vivo Energy operates and markets its products in countries across North, West, East and Southern Africa. The
Group has a network of over 2,200 service stations in 23 countries operating under the Shell and Engen brands
and exports lubricants to a number of other African countries. Its retail offering includes fuels, lubricants, card
services, shops, restaurants and other non-fuel services. It provides fuels, lubricants and liquefied petroleum gas
(LPG) to business customers across a range of sectors including marine, aviation, mining, construction, power,
transport and manufacturing.
The Company employs around 2,700 people and has access to over 1,000,000 cubic metres of fuel storage
capacity and has a joint venture, Shell and Vivo Lubricants B.V., that sources, blends, packages and supplies
Shell-branded lubricants.
For more information about Vivo Energy please visit www.vivoenergy.com
Forward-looking-statements
This announcement includes forward-looking statements. These forward-looking statements involve known and unknown
risks and uncertainties, including risks associated with the impact of COVID-19, many of which are beyond the Company's
control and all of which are based on the Directors' current beliefs and expectations about future events. Forward-looking
statements are sometimes identified by the use of forward-looking terminology such as: "believe", "expects", "may", "will",
"could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned",
"anticipates" or "targets" or the negative thereof, other variations thereon or comparable terminology. These
forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout
this report and include statements regarding the intentions, beliefs or current expectations of the Directors or the Group
concerning, among other things, the future results of operations, financial condition, prospects, growth, strategies of the
Group and the industry in which it operates.
No assurance can be given that such future results will be achieved; actual events or results may differ materially as a
result of risks and uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially
from the future results indicated, expressed, or implied in such forward-looking statements.
Such forward-looking statements contained in this report speak only as of the date of this report. The Company and the
Directors expressly disclaim any obligation or undertaking to update these forward-looking statements contained in the
document to reflect any change in their expectations or any change in events, conditions, or circumstances on which such
statements are based unless required to do so by applicable law
JSE Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
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Date: 28-07-2020 08:00:00
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