Vivo Energy plc

Thanks, Christian. Good morning, everybody. Thank you to those who've braved the queues to get in the building. And apologies to those who are on the line. We've had some issues getting people into the building, so we've had to delay for a few minutes. So thank you very much for your patience. So we're very pleased to announce our full year results for 2019. Presenting them will be Christian Chemas, our CEO, and Johan de Prater, our CFO. Johan's struggling with a pretty bad back at the moment, so he's actually going to sit down to present. There's nothing else untoward going on there, but please bear with us for a slightly different presenting style to normal. But what we'll do is run through the slides, and then we will take questions from the room and move into, after that, move into questions from the call. So with that, Christian, I shall hand over to you.

Thank you. I just hope it's the coronavirus that is making it such an empty room, but anyway, it's good to have that excuse. So anyway, welcome everybody. Thank you, Giles. Where is the blip? You walked away with it. Who's going to do it? You got it? So you're going to do it? Okay, fine. So one less thing to do so I can concentrate on my talking. So you're very, very welcome. I see there is actual physical shareholders here as well. I counted three at least. Is it three, one, two? Let me see. Maybe I'm wrong, but I see at least three, which is very good. All the rest are strong partners who support us in our endeavors to make sure that this company is nice and square. And what you see is what you read and what is there. And that is how we built it, and we intend to keep it that way. You jumped a queue here. There was a big declaration thing, which I presume you've all read it, and you're happy with me to go through it or to pass it. Pass it? Yes? Thank you. Next. So the format is same as last year's. I'll do a short introduction if I can. Then I'll pass on to Johan who is sitting down because he's hurt his back. It's nothing to do with me. all the results but he will do it sitting down and I thank him very much for coming because believe me yesterday he was seriously bent and we had magicians working on his back yesterday afternoon so let me now proceed then Johan will do the presentation when it comes to the financial review I will come back and or talk about 2020 and the future. And then I'll open it to floor questions and answer, online questions and answers for everybody to shoot away. Thank you. Slide, please. Thank you. So I'll take this off. I don't need it. well from from the results you can see that we've demonstrated strength uh resilience to the business of the business and we have delivered another strong year it is our second year we're very proud to to be on that trend and you'll see further along in my presentation that that the trend is only two not only two years old and we've been doing that for quite a few years uh we we continue to move forward and build the the platform that is necessary for future growth that is now what I would say, an asset. It is there for tomorrow. And we have proved also that we can deliver very strong, big projects successfully. I'll talk about this. And at the same time, we did not lose focus on the important HSE3 issue. It is fundamental in our business. You know, it is not a simple or a super... Anodin? Anodin in English again, I forget. Anyways... I'm talking in French now. Yeah, a common product. These are dangerous products and therefore it is fundamental the HSSC is at the top of our mind, in our hearts, in our DNA. And it is the case and we work very hard at it. Finally, Johan will talk at length about that. We deliver strong cash flow and have increased what I would call our recommendation for dividends for our shareholders to show that we are confident in the future. Next. Last year, or the beginning of last year, we set out commitments, and we said we're going to do this, we're going to do this, and we're going to do that. Yes, I'm proud to say that we have delivered what we promised, right? So, commitments equal to delivery, and that is what we have done. And again, we delivered against all of them, not only one, or selectively. of commitments were delivered, and we will continue to demonstrate that, that the track record as a public company is a continuation of our track record as a private company. We were doing that year on year, and we will now continue doing that year on year as a public company. And that is what we promise and what we have to deliver. Thank you. And when you look at all this, and you can see, are we in the right slide? Yes? Thank you. Which leads, what can I say? All the segments have shown growth. From the top to the bottom, they're all growing. It is good to have, be it in the engine or the shell markets. The business now has more than absorbed the impact of the margins in Morocco in 2018. That has been absorbed and we moved on. The Morocco business is, and I'll talk about it later on, is not the heavyweight it used to be. And that is good for us. Finally, we have shown that the growth is continuing. And when you look at the difference between 2015 and 2019, we've increased the adjusted EBITDA by 80%. I mean, this is a strong, strong performance. And we're continuing to do it, even though we had hits along the road. And we will. It's normal. The world is not linear. It goes up and down. Finally, I think that 2019 was a transition year where through engine, ERPs and a whole series of impacts and effects that came along the way. Well, that has enabled us to have now a strong platform to build for 2020. Next. It is important to highlight the diversification of our business. You know we report on three segments, but we operate over a whole series of different businesses across the continent. Each one has different dynamics and drivers, but we believe that together They offer that strength, that resilience to external effects and even internal effects. I mean, that is the way the business is managed. And when you see on that pie, 75% of the business is, I guess, around stable margins. So you have not uncertainty, but you have 25% that is subject to variability or volatility. And, well, we can live with that. We know how to manage it, and we manage it. Regulated fuels, you can see deregulated fuel at 20%, and then through aviation and marine, that's the 25% I was referring to. All the rest is fairly stable, right? So that is pretty good to have, and we manage it in an efficient way. Next. You can see from these two pies as well that we have a lot of different businesses, but the largest one is now down to 13%, and that is Morocco. It was a high of 29%. I'm talking Morocco retail here. It was at a high of 29% in 2017, if I'm not mistaken. So it went down to 18 and it's down to 13. So divided by two. How did this happen? Not by magic. It happened by the growth of other businesses within the existing perimeter, i.e. the 15 shell countries. It happened by the... merger or the acquisition of the engine countries, so that further diluted that weight, and basically the whole cocktail, which you saw earlier on, has enabled us to reduce that, what I would call that big white elephant in the house of Vivo Energy, and therefore we can live with it now at 13%. There are other businesses that represent 5% or under, well, fine, but it's not as critical as it used to be, and we can live with that. Finally, what you have to realise is that the forex element to our business. When you see that 65%, if I'm not mistaken, is directly hedged to the euro or the dollar, well, that's a good hedge to have, and we can manage it. The remaining, well, the rest is in the market. The margins are adjusted annually or biannually or every two years, and that allows you to have what I would call a US dollar margin that remains fairly stable over a period of time, and we've shown it before a couple of times. Yes? Well, to sum up, and before I hand up to Johan, who will carry on on the finance presentation, it's a good performance for 2019. A lot of challenges in 2019, but we still delivered what we promised, and we're very proud of it. And we are building, therefore, a platform for future growth in 2020 and the years ahead through the engine business through the existing what was the existing shell business because we know there is opportunity there is obviously a lot more opportunities in the engine countries because we've done our homework very well in the shell countries but we will work furthermore to bring that value to vivo energy and continue to do it day after day johan please thank you thank you christian and good morning everyone

As you can see, the numbers speak for themselves this morning, a very strong set of results. The free cash flow number is probably the standout number, especially if you remember back in August, we actually had a negative number in the first half. And I'll talk about it more in detail, given that there's some timing impacts around working capital. But even the underlying number, if you exclude these timing numbers, is very strong. And Christian mentioned the dividend. We have declared a total dividend of 3.8 cents per share, which is up 15% on a full pro forma year on year, accounting for 12 months of 18, with the final dividend doubling compared to last year, which again shows the confidence that we have in the business going forward. This is a slide we showed again in August as well as it really highlights the momentum we've gathered in 2019. You can see basically two drivers. One is the shell margin. which has now recovered and stabilized. Just to remind people, especially on the retail margin and the effect of Morocco, if we go back to the first half of 2018, the retail margin was still at $78 per metric cube. Then we saw the decrease to 73 and then hit the lowest in 71 in the first half of 19. And in the second half, we're now at $72. So you can see that now really has has normalized, and then the second impact that you see is really the addition of the engine acquisition from March last year. Moving on to the heat map, again, something we start sharing in August. And you can see it's a different picture from the first half. Second half, we see a recovery. You see that Ivory Coast and Tunisia have rebounded from their first-half performance, with also Uganda having a very strong second half as they kind of you know moved away from from uh maximizing unit margin to actually uh regaining some of the market share that that we sacrificed in the first half we also had very strong performances in kenya burkina faso and mauritius um you might remember guinea was pink in the first half continues to be pink in the second half but that's mainly because of the classification of white pumps that used to be in retail and now have moved to commercial so the performance actually in Guinea of the Shell branded sites have been very strong. Some of the weaker markets, we continue to focus on price leadership in Ghana, maximizing our total gross cash profit, so like we did in Uganda. And we also see the big country there is Mali, where again for the year they're positive, but in the second half, due to the security issues that they have as a country, we saw an impact on the retail fuel volume. Moving to the engine markets, which were not there in the first half, we've included them. And you can see actually, and this is based on MI numbers, because we didn't own the business in 18. But year on year, you can see that all eight markets showed a very healthy growth of over 5% across the board. So we feel that the momentum is back. I think Shell retail volumes grew about 2% on the year, but they kind of showed momentum towards the second half growing at 3% year on year. Now, talking about retail, you can see gross cash profit is up 6 percent, which really has two effects. It's the margin, as I mentioned, is down 5 percent year on year, but volume is up 10 percent. Both non-fuel retail and premium fuels have made strong contributions to this year, and you can see that on the right-hand side. Non-fuel retail gross cash profit is now $33 million, clearly held by Enjin, but even without Enjin, The Shell-branded non-fuel retail business is up 16 percent year on year, so delivering slightly ahead of guidance. We see a lot of potential of QSR in the engine markets and are actually planning to open a KFC in Gabon and one in Rwanda later this year. On the premium fuels, which is at the bottom right-hand corner, we actually sell now the V-Power in five markets, including Tunisia, which was launched in the second half of 2018. And you can see it accounts now 2% of volume and 3% of group profits. But what you see there is actually the year-on-year growth in the volume from V-Power, which is going from 24% to 30% in 2019. So again, we start from a low base, but tremendous momentum in our premium fuels business. Moving on to commercial, again, second year in a row, very strong year with gross cash profit growth overall 18%. And you can see both aviation and marine growing 23% and core commercial growing 17%, so good performance in both businesses. We highlight that we're focusing now on gross cash profits because actually volume in the Shell-branded markets is slightly down year on year, partly driven because, as we mentioned in August, we had the wholesale business, which is kind of a trading business. We pulled out of it because it became not profitable for us, which had a mixed effect, as well as some markets, some mines that went into maintenance, but in summary, The unit margin was up 4%, compensating for the small decrease in volume. And you can also see the impact of engine, where, again, engine delivered, and also we had a supply contract in the second half, which helped grow the volume, especially in the second half, and we will see that impact going to the first half of 2020. The final segment is lubricants. It's our smallest market, but as you remember, has the highest unit margin. We saw gross cash of profit grow at 6%. But again, we see, as you remember, in August, the first half was quite challenging around volumes, especially in the B2C channel in one of our markets. But we took action and recovered in the second half. And you can see that, you know, business is performing. And you might remember, we often discussed the shell lubricants margin around $550 per metric cube. And we can now, you know, confirm that for the full year, we actually have reached that $550 unit margin in shell lubricants. As you know, we focus a lot on costs, so we just want to share this cost. And this is the GNA cost for Vivo Energy as a group for the last three years. I want you to focus on the clean GNA because there's some special items and the depreciation which we want to exclude. So the cash, let's call them the clean cash GNA expenses have, you know, for the last three years only grown by $4 million despite additional cost of being public. Also, you know, growing our volumes by 15% and adding eight new markets. It really highlights, you know, the operating leverage we have in the business. and our focus on efficiencies. How do we do that? We continue to look at opportunities to make sure that our costs are as lean as possible. And also, given our model of having a virtual central organization, we benefit of some of the currency depreciations in the African continent. So that also helps to keep our costs down. But again, I think these are very impressive numbers. Moving on to net income, as you can see, adjusted net income is lower, but I'd like to highlight that this is mostly driven by non-cash items. You can see that we saw finance costs specifically increasing year on year, but there's a mark-to-market accounting expense on our swaps. As you remember, our term loans, we actually entered into a swap agreement where we moved from from floating to fixed interest rates, given that interest rates actually went down. We assumed they were going up or going down. We actually have to reflect that in our books. And you can see there it's an $8 million cost. And then in Zimbabwe, under IFRS, we were forced to adopt our hyperinflation accounting. And again, we saw a $5 million inflation adjustment in our finance expenses. We also see that the effective tax rate increased to 39 percent from 69 percent – from 36 percent, sorry, which really has several factors. We were – Moroccan Revenue Authority imposed a 2 percent – 2.5 percent additional income tax on the oil – on the market – the oil marketing companies. We also have the engine effect, which has slightly increased our tax rate. Moving on, as I said, to the cash flow, you can see, again, a lot of numbers. The bottom line number is the adjusted fee cash flow, you know, adjusting for special items, but really what we look at. You can see growth from $154 million in 2018 to $325 million. I think there's about $111 million of timing. impact related to working capital payments. Most of them are coming from Kenya, from East Africa, where, as I mentioned also in August, the industry is supplied by tenders. If you win tenders, it has a massive impact on your working capital because you supply the whole industry and you get attractive supply terms. If you don't win, you actually have to prepay for your fuel. Now, it happened that in Q4, we didn't win any in Q2, but in Q4, we won actually... one more than expected. And so that impact you can see on the cash flow. But even as you remove those, you still see a very healthy adjusted free cash flow over $200 million, which leads us to leverage. Because of the strong cash flow generation, our leverage net debt over EBITDA has now fallen to just 0.5 times We paid back $80 million of our amortizing loan, but we also drew about $62 million of the RCF to pay for the cash part of the engine acquisition. Leases and short-term borrowings have gone up slightly, which is due to the engine acquisitions. And we'll continue to pay the debt during this year. And we expect leverage to remain somewhere between the 2018 and 2019 levels. And again, as you might remember, in August, our leverage actually was 1.1. So we kind of have this range, depending on working capital movements, sit between 0.5 and let's call it 1 going forward. Capital returns and capital expenditures, very important as we continue to be investing for future growth. Oroache remained above 20%, which is really what we set as a target, and we stick to that target at 21%. We saw a 22% increase in growth CapEx during the year as we continue to expand both our fuel and non-fuel offerings. Special projects has slightly gone down because that's mostly related to our ERP implementation. But there's still other projects like site automation which are ongoing. And we actually expect to see maintenance CapEx is slightly down. Don't forget there's also a maintenance OPEX element related to our maintenance, but we expect our maintenance capex slightly up for this year as we make sure that our sites remain, you know, shining or, you know, up to the standards that we like to see them. So now moving on to the final slide, which is the technical guidance, and Christian will add some other guidance, but, you know, This is the guidance. So on CapEx, we see a small pickup, you know, to about $150, $160 million. You know, continue to foresee adding 80 to 100 sites for the year, including also some KDRs, which are knockdown and rebuilds. The tax will remain to be broadly in line with the 2019 number, because Morocco, higher tax remains in place for the time being. And then working capital, we continue to see our structural negative working capital to be in place. But as I said, there will be some timing elements that probably will bring down the cash flow year on year, given that the 325 is not the real underlying number. That is the end of my section, and I hand it back to Christian.