Vivo Energy plc

Good morning to everybody. Thank you for coming. I see that there are representatives from all partners, be it the banks, the lawyers, the accounting firms, I think. No? Yes? Maybe? No? Shareholders, the most important. I counted rapidly. There's over 73% representation, so it's nice to have. And thank you for coming. So this is our first result presentation. since Vivo Energy, now PLC, listed on the London Stock Exchange, so it's exciting to be here with you. Some of the faces are recognizable, some are new, but we are the same, Johan and myself. Maybe we've gone a bit more gray since we've listed. We're wearing now serious spectacles instead of the blue ones I used to wear. But anyway, we are proud to be here, and we are happy to be here to announce also our 2018 results. I would like, therefore, also to welcome other participants through the net or through the web stream or conference call facilities who are invisible to us, but who are very present. So welcome to you as well. No notes. Sorry. Next. You lost me. Okay, so for those who don't know me, I'm Christian Chamas, and Johan is sitting there on my right with the red spectacles. That's Johan, the CFO of the group. We haven't changed, and we will continue driving your company. Next, please. We will go through... I guess four important points. I will do the introduction and the business update. Johan will spend some time on the financials and bring you upstream and talk about the performance. And then I will conclude in point number three through a summary and an outlook for tomorrow. And finally, we will end with a Q&A session. which will be open to the floor, and then we'll move to the web, and then we'll move to the conference calling. So if that is okay with you, we will start the presentations. Please. As a reminder, for those who haven't been around or participated and who are less familiar with our business, well, we operate in three segments. We are one of Africa's largest retailers. Retail is the core of our business. We highlighted it at IPO in our prospectus. That remains our core business, and it generates nearly 60% of our adjusted EBITDA. So it is important. And in the markets, we distribute gasoline and gas oils across 1,800 Shell-branded fuel stations. That is how we do it. But we also have now a strong growing non-fuel activity, which is our convenience and our food offerings and other offerings. And that is growing very nicely across all our countries. That is therefore the core. In the commercial segment, which also represents a quarter of our adjusted EBITDA, we offer a full range of services to our clients, be it industrial, mining, transport, construction, across the board, marine, LPG, you name it. That is where we bring our lubricants, our services, our know-how, our products, aditivated and otherwise, to the commercial segment. And that is also done through $5,000. I mean, it's a big client base across our country. And finally, in the middle, between these two, because it feeds into the two, you will see the lubricants activity. That is an important activity. It is a special activity. And as you can see from the figures, it contributes nicely to our bottom line. Without going into detail, because Johan will go into that detail, we have strong results across all the segments in the first half of 2018. You can see an increase of about 4% of the total volumes to 4.6 billion litres, and an adjusted EBITDA of about $204 million, which is an increase of about 8% year-on-year. So a good, strong performance for this first half after our first listing of early May. Next. If I could highlight a few operational points. Yes, we are growing very fast. We are highly growth-driven. We continue doing it. Our markets are growth-driven. All of them, the 15 we currently operate in, there is growth everywhere. And we seize those opportunities like we... indicated in our prospectus. We carry on doing that. How? By investing in new retail activities, in new retail outlets. We had promised to deliver about 80. We're on track, 80 for the year. So we're on track as today. We've also promised to open 100 new food and convenience retail outlets through the year. We are on track, and that will bring more growth when all these are open. So it is on track to bring that growth. What is important also to highlight, and you see it somewhere there, we had an innovative partnership with Kentucky Fried Chicken in Botswana, which has worked. This is a JV, where we took over quite a few of their outlets. I think we mentioned it also in the prospectus. That has worked very well, and Kentucky Fried Chicken is satisfied with that, and we have reproduced the same model in Cote d'Ivoire, and where we actually opened the first Kentucky Fried Chicken in the country through that joint venture. So it is something which is very profitable for us and it brings value across the whole chain. So that is something that has contributed immensely to our business and it actually has impact, has grown by about 22% compared to the previous period. So that's nice to have and it continues to grow. The commercial volume has grown, and you see it in the figures earlier on, because we have seized the opportunities of contracts through aviation and even marine. Well, that was there. We took it, and we took it also with good terms and conditions, because I think you seem to remember that we walk away when it's not nice, but we take it when it's good. So this year we took it. Finally, and not the least, we did a lot of work for the IPO. And that took a lot of our time since sometime October last year or November. And in May, we saw the successful IPO of our company in London. It was the largest IPO in London in over a decade, so it's nice to talk about it. It was successful, the largest on the longest London stock exchange for the year at the time of listing. And it's also the first dual listing between Johannesburg and London so in nearly 20 years so again another positive result we have also welcomed during that same period a new board right of non-executive directors and new chairman in the person of John Daly and that and we have put in place and we continue because it's a permanent exercise new governance we follow the new regulations that are published every week and we adapt our organization to meet them, because that's the only way, is that we follow governance, which is where we live and where we abide by. Importantly, and the final two points, and I'll talk about them a bit more in detail, the first one being the EVO, the Engine Deal. Well, that is progressing. Quite a few of the hurdles are behind us, there is only one remaining, and we are striving to get it on board when I can't promise a date. It is difficult to promise a date in these complications, but it will happen. Finally, one of the strong foundations of our group is health and safety. We continue having fantastic results. We've had no recordable incidents in the first half. So for the track record is still intact and we continue making sure that that happens day after day because it is fundamental. And we don't want to hear it. We don't want to see it because it's not good for the business. It's not good for your reputation. And therefore, we continue building on that strong foundation. If we can continue, please. It is very easy now to continue because I'm handing it over to Johan. Johan, the floor is yours. Thank you.

Thank you, Christian. So moving on to page seven, as you can see from the first half, we deliver strong growth across all financial KPIs while also maintaining a very stable balance sheet with low leverage. Both volumes and margins were healthy. A 4% increase in volume resulted in a gross cash profit increase of 7%, adjusted EBITDA of 8%, and adjusted net income of 11%. Adjusted EBITDA of the first half excludes about $27 million of specials or one-offs, about 90% of which are related to the IPO expenses as well as the EVO expenses. It's also worth noting that our tax rate, hatched down another 100 basis points from 38 to 37%. Of the back of these results, we're also very pleased to announce our first dividend in line with the guidance of about $8 million, which is approximately one US cents per share. Moving on to page eight, where we look at the key performance drivers by segments. You can see the overall adjusted EBITDA up 8% to $204 million. You can see volume up 4% to $4.6 billion, as Christian mentioned. We also saw healthy margins. We saw a 3% increase in our overall group margin to $74 per thousand liters. Growth in both retail margins by 2 percent, commercial, as Christian mentioned, 8 percent, quite driven by both aviation but general commercial margins, and slightly offset by decline in lubricants margins by 8 percent, which is driven by the fact that we've not been able to fully reflect the increase of base oils in our pricing of lubricants. Overall retail contributed $121 million in adjusted EBITDA, a 9% year-on-year increase. Commercial contributed $58 million, which is a 5% year-on-year increase. Despite the lower margins in lubricants, Adjusted EBITDA was up 10% year-on-year to $25 million, which is mostly explained by the contribution of the equity pickup in the SVL joint venture, which was purchased last year for the amount of $6 million. Moving on to retail margins, you can see that our performance this year continued to demonstrate that our retail margins are decoupled from oil prices. As we talked about it quite a lot during the roadshow and the IPO process, higher oil prices don't reflect in lower margins. We were able to keep our margins constant at $78 per 1,000 liters. This also excludes the impact of non-fuel retail, where gross margin, as Christian mentioned, of the non-fuel retail increased to 11 million, which is a 22% increase year on year. It's important also to highlight that our portfolio diversification underpins the resilience of our earnings. Nearly 70% of our earnings are pegged to either the euro and the dollar, and you can see that all segments have a meaningful contribution to the bottom line. Moving on to the commercial segment on page 10. You can see that the split between what we call core commercial on one hand and aviation and marine remained in line with the 2017 numbers both for volume and cash gross margin. The volume of the growth of 2% was driven by additional aviation as well as additional bunkering both in spot sales in marine in the countries where we operate those businesses. Volume in the core commercial business was more or less flat, actually slight decline of 1%. As mentioned, overall unit margins up 8% to $47 per 1,000 liters. Core commercial units margin increased by 6%, while aviation and marine unit margins improved 33% to $31 per 1,000 liters. So very healthy results. Finally, moving on to the next page in lubricants. Again, the split between retail and B2C on one hand and commercial and export on the other hand remained in line with 2017 numbers. The volume growth of 3% was driven by effective marketing campaigns and tactical initiatives on retail and B2C, such as Lubez as well as oil specialists who operate on the sites across the portfolio. Overall unit margin decreased 8%, as I said, as a result of increase in base oils. But in response to that, and we're focusing very hard on this in terms of active price management to make sure we reflect those increases, as well as optimizing the sales mix of the different grades within lubricants. Moving on to the cash flow, you can see that on an operating free cash flow during the first half, after taxes, we actually had a negative outflow of $3 million. And there's actually three main drivers behind that. The first one, as mentioned, are the special items. of $27 million, of which 24 are related to Enjin and especially the IPO. There's also a timing difference in the receipt of other government receivables, which we account for in other assets. And this actually unfortunately offsets more than the positive impact of our working capital. So when you look at the pure working capital, that was still negative at about $33 million. However, the receivables compensated that. Having said that, FOR THOSE OTHER RECEIVABLES, WE RECEIVED $40 MILLION ALREADY IN THE MONTH OF JULY TO COMPENSATE FOR THAT. AND THEN THE FINAL ELEMENT IS AN INCREASE IN CAPEX OF $21 MILLION, WHICH IS DRIVEN BY TWO FACTORS. ONE IS AN ACCELERATED RETAIL EXPANSION, SO WE'RE ACTUALLY BEEN BUILDING MORE SITES EARLIER IN THE YEAR, AS WELL AS ABOUT $12 MILLION RELATED TO IT COSTS, WHICH ARE MOSTLY DRIVEN BY OUR NEW SAP IMPLEMENTATION PROGRAM that is happening as we speak. So if you adjust for those three factors, cash flow actually on a year-on-year basis would be higher than last year. And in spite of the negative cash flow, we continue to fund all our growth and CapEx self-funded. So it remains a cash-generating business, and we're very proud of that. Moving on to the balance sheet, as you can see, Balance sheet is strong, leverage is low with ample liquidity available. We repaid $42 million of our term loan since December and also since the IPO. Our leverage, which includes $122 million of long-term lease liabilities, remains more or less flat at adjusted EBITDA for the last 12 months versus net debt in just that one time, which is in line with, again, with what we showed at the IPO. and well within the target of one and a half times leverage. Then finally, final slide on the finance. During the first half of our performance, our performance was in line with the guidance we gave at IPO, and at this stage, with the information available today, our guidance for the full year remains unchanged. Now I'll hand it back to Christian, provide a summary as well as the outlook.

If we go to the summary, please. Well, this is, I guess, summarizes the position, the situation, the macro, and I will use the few minutes left to recap a few points. to visit two points that need updates, i.e. Morocco the EVO transaction, and then we will be able to move into the Q&A part of this meeting. As you can see, the macro side, we still have a growth story. The countries are still on that dynamic, and it obviously impacts us because we reap the benefit. The organization we have has proven beyond any doubt that it can deliver before results two projects and of course IPO and tomorrow the SAP project so all that is good and works very well and we're pleased with it and we're happy with our teams and proud of our teams our business standards and operations well they are Top class, we see it through our HSEC standards, we see it through our resilience to things happening, we adapt very quickly, we move and we seize opportunities, so that's a very good culture to have. Our financials, and Johan just talked about it, are above last year's results, so that is satisfactory to have as well. Morocco and Evo, I will talk about it in a few moments, and basically, We remain with a vision which is wanting to be, and well, we already are well on that way, the most respected energy company in Africa, and that with the more growth we have, the more business development we have, that will continue. We will continue reaping these benefits, and we will have that gold-plated reputation. And that is the ultimate vision for our company. If I can move... to the favorite topic since listing, Morocco. The last meetings, it has been a lot of comments, a lot of speculation on the potential re-regulation of the market, et cetera, et cetera, but you have to realize that since the middle of June, nothing new. There were only two meetings between the industry and the government. When I say the government, it is one minister. And basically from that date, nothing new. All that you see or read is through hearsay, speculation, rumors, which is actually quite a favorite sport in quite a few countries. But we as Vivo Energy, we are one of the leading players in Morocco with two others. We therefore have engaged discussions with government in order to see where they want to go, what they want to put in place, and today nothing has really come out. Compared to middle of June, beginning of August, no news story, nothing. The government, is changing. This morning I found out that the Minister of Finance and Commerce has been, Economy and Finance if I'm not mistaken, has been resigned is the word. So there is going to be change. Is there going to be a change of government? I have no idea. It is in the hands of the sovereign and we will see what happens. Things are complex and complicated and we will see. What is clear is that I have to highlight that when we published our prospectus we indicated at that time that Morocco's retail business represented 29% of the group's EBITDA. That, with time, has now moved towards 22%. It is a significantly lower figure. Why? Because our business elsewhere has grown. The more we add, the more you dilute that weight. And therefore, the absolute figure is lower. of any risk. So, and we feel more comfortable that whatever scenario, we will adapt. We have shown resilience. It is our job as managers and executives of this company to have the right plans in order to react to a scenario like this. There is nothing unusual. Twelve out of fifteen of our countries are regulated. We know how to live in regulator. Today, Morocco is a liberalized environment and we will see what happens. So that is the information I wanted to give. So you can tell me nothing new, but because there is nothing new. Okay? And we wait and we will inform the market if anything happens. And we will adapt, believe me. The other point which is important and I would like to update is EVO, the engine transaction. the nine new countries. You know it is important for us. It brings 300 new sites. It allows us to enter nine new countries where we're not present. It is important. We are working very hard. I can tell you today that out of those nine countries, there is only one remaining where we need to obtain final approvals. That is in progress. Our seller engine is working very hard in order to obtain an outcome, a positive outcome. It is in the hands of government and engine and ourselves. We work a lot of it. Believe me, we are on it every day from Monday to Friday and sometimes Saturday and Sunday. And when it is solved, we will come back to the market and tell you it is solved, we can move on. Today, we are not there yet, but it will come one day. When? I cannot tell you. The less haste we put on the exercise, the better off we are. So that is the engine transaction. And finally, what I would like to highlight is, you know, it does bring value. It does bring value to Vivo because it brings us growth potential. Because you enter new countries, it brings opportunities to grow what you inherit and bring more to the table. We highlighted it in our IPO document. And we will do that in the same way as we've done it in Vivo, by growing the existing business, by adding more, by making more services, more offering, more QSR, more CR. And that is the model. And we will make a success out of it because that is what we are here for. is to ensure that we deliver. And then we will become a major player in 24 countries, 2,100 outlets. It is a good story to have. So we will work very hard for its completion, I assure you. Investment highlights, again, I have to highlight, again, you might say he's repeating the same thing, but yes, the market is still growing. markets we are in, it is still growth. So we are a growth story in a market that is growing. Fundamental not to forget, right? The other important element is the platform. I mean, we are number one or number two. We have leading positions. We are diversified. That is why Morocco's weight drops day after day, because we are diversified. There is more activities. There are more segments. There are more countries. The third important point is that our business model has proven that it works. It is integrated. It is entrepreneurial. And finally, it is performance-driven. People are focused on performance, because at the end of the day, that is how they're recognized and rewarded. So the whole system works, and it continues to work. And the other two important points, and I know I repeat it again, yes, growth. Yes, growth and growth. Organic, inorganic, merger and acquisition. That is the agenda. And we will continue doing it. And finally, we have shown that our financial model is resilient. And we will adapt to a changing environment. And that is our business. We have to adapt because the world is changing. It's not a constant environment. So, in conclusion, if I could move to the final slide. Thank you. Yeah, I know, but there was another one where I summarized the next step. Is that it? Sorry, I had to maybe give instructions on the Q&As. Yeah? Okay, can I? Thank you. So thank you, I'll give you some guidelines for the Q&As. So first of all, we'll open it to all the sitting participants in this room. We'll take the questions from the floor. Once we've exhausted all this, and if time allows, of course, we will open it to the questions from a conference call or the webcast facilities. And before we do that, when you ask a question, please give us your name so that we know who is asking the questions, especially when it comes to the calls or the web call. Thank you. The floor is yours now. I will stop speaking. Maybe I'll sit there. Thank you.