Vivo Energy plc

Good morning everyone and thank you for joining us for our H1 2021 results presentation. With me today is Christian Chammas, our CEO, and Doug Lafferty, our CFO. We're all together, socially distanced in one room, so hopefully we won't have any technical issues today. We will follow the normal format of running through the presentation and then opening up for Q&A. I'd like to take the opportunity to remind you that if you would like to ask a question, you do need to be dialled into the conference line rather than the webcast. I will now hand over to Christian to take you through the start of the presentation.

Thank you, Giles, and good morning to everyone. I won't dwell on this slide, as you've all seen it before, and we will move straight to the agenda. Okay, I'll give you a quick overview of the first half performance and then hand over to Doug to take us through the financials. I'll then give an update on COVID-19's impact on our markets and our progress against our key focus areas. So, moving to the meat of the presentation. We are very pleased to have delivered such a strong start to the year as the recovery in our markets continued. adjusted a beta of 220 million, was well ahead of half one 2020, and importantly, 4% ahead of half one 2019, driven by improving volumes and good margins. We've always said that our markets and our business are resilient, and we continue to demonstrate this quarter after quarter as we adapt to the challenges created by COVID-19. The recovery was led by a really good performance in our retail segment, driven by both increasing mobility in our markets, as well as by a range of actions we will talk through in the presentation, including our network growth. We have continued to invest in growth and deliver shareholder returns. And this is demonstrated by our interim dividend declaration, which means that we have now declared over $100 million of dividends since the start of the pandemic. None of this would have been possible without our teams in the operating countries who have stayed safe while driving the business forward in the face of continuing uncertainty created by COVID-19. Finally, there is no change to our expectations for the full year, and we will continue to navigate the challenges created by COVID-19. I wanted to show this slide again as it gives some good insight into the pace of the recovery and that retail is the key driver of this at 37% ahead of the same period last year. Q2 2020 was significantly impacted by the restrictions imposed at the start of the pandemic, but the retail business is now back ahead of Q2 2019 as well. The group recovery is still lagging retail, but this is predominantly down to the commercial supply contract which ended in Q3 2020. The other impact is a subdued aviation business, but that will take some more time to correct. What you can't see on this chart is the strength of our lubricants business, given that the volumes are small, which has seen a very strong recovery in this first half. This slide just shows how the retail recovery has been spread across our markets and compares Half One 2021 with Half One 2019 to give you a better understanding of the shape of the recovery. We now have 15 of our markets back in growth versus Half One 2019, with most of them more than 5% ahead of that time. It is notable that half one performance has been achieved without the benefit of two of our largest markets by volume, Morocco and Tunisia, who are still behind half one 2019 and account for over 30% of our group volumes pre-pandemic. Looking at the engine markets, and we're only showing March to June performance here to make it comparable to 2019, you can see the benefit of the work we've been doing to grow the business, with volumes up 25% excluding Zimbabwe, where currency constraints are impacting fuel supply into the country. This performance is even with restrictions still constraining demand across almost all of our markets. Okay, so now I will hand over to Doug who will talk you through the financial impact of the operation recovery I've just highlighted.

Thank you. Thanks, Christian, and good morning, everyone. I'm happy to be presenting another strong set of numbers today. Here you can see a quick snapshot of our performance with volumes well ahead of last year and back in line with H1 2019. As Christian has talked to, it is mainly the retail volumes driving the growth with the total group volumes held back by the end of the supply contract in Q3 last year. On a comparable basis, this supply contract benefited H1 2020 by around 160 million litres of low margin volumes within the commercial segment, and we've managed to overcome around half of that headwind, mainly through additional reseller volumes. On the margin side, we're ahead of both H1 2020 and H1 2019, as we've continued to benefit from the supply and pricing environment, together with the product mix effect, as lubricants saw both strong volume growth and very strong margins during the period. As we've said previously, these margins will normalise and we saw that happening during the period with Q2 lower than Q1. The higher volumes coupled with the strong margins has meant that we delivered gross cash profit of $385 million, 28% higher than the first half of 2020 and pleasingly 10% ahead of the first half of 2019. This is a business that can generate a lot of operational leverage, as most of our cost base is fixed. This worked against us last year as the volumes fell, but you can see the benefits in adjusted EBITDA this year as the volumes returned. One of my priorities is to focus on the leakage between EBITDA and net income, which I know is an area of focus for the market, and it's good to see that both finance expense and ETR have come back nicely, although depreciation is a little higher due to the investments we've been making in expanding our network. Last year, we saw finance expenses increase, primarily due to the increased use of working capital facilities to cope with the disruption in the market, and they've now returned to more normal levels. ETR is also back at 40%, compared to 69% in H1 2020 and 42% in H2 2020. These were elevated due to the withholding tax component of our taxes remaining stable year on year, which meant they had a far bigger relative impact due to earnings being lower. The higher adjusted EBITDA, coupled with the lower leakage, has supported the step up in EPS to $0.06, meaningfully ahead of H1 2020 and in line with H1 2019. Moving into a more detailed view of the business, you can see that with the exception of the aviation and marine businesses, which account for around 3% of gross cash profit, all of our businesses return to growth, not just against H1 2020, but also against H1 2019. This is fantastic to see and really shows the resilience in the business that we've been talking about over the last six months. Retail was very strong across the board, with volume growth driven by returning mobility, customer marketing initiatives and site expansion. Margins remained strong at $78 per 1,000 litres, helped in part by the continuing growth in our premium fuels business, which now accounts for 6% of the segment gross cash profits. Non-fuel retail rebounded, even with restrictions such as curfews and limitations on gatherings having a more meaningful impact on demand than they have on fuel. We continue to expand the number of offerings that we have on our sites and are evolving how we operate to be able to meet developing customer needs. On the commercial side, you can see the core commercial business has been very stable through the whole pandemic. This business services a range of different industries, and this diversification has provided a real hedge against volatility. We no longer have the benefit of the supply contract, but partially offset these volumes through increased reseller volumes in a number of markets. Higher unit margins more than offset the lower volumes, leading to our gross cash profit growing slightly period on period. Looking in more detail at the aviation and marine business, it is still well below 2019 levels, with volumes in the aviation business still in line with H1 2020, albeit with higher unit margins. We did see a small recovery in volumes in the marine business, and together the net result has been a small improvement from H1 2020. Finally, to lubricants, which had a really great H1 performance. This segment sells into both retail and commercial customers, and so it has benefited both from the pickup in the mobility of our consumers, but also from the strength of the mining industry. This has supported volume growth of 14% against both H120 and H1 2019 to 75 million litres, which represents a new high for us. The margins have also stepped up, but I will caution that this is again predominantly temporary. Whilst we have benefited from customers increasing preference for premium lubricants across both the retail and commercial businesses, we have also moved prices up quite materially during the period. We've done this ahead of the H2 impact of the increase in base oil prices, which will dilute these margins as we move through the second half. Staying with margins, there is a lot of focus on where these will stabilize, given the strong margins over the past nine months and the quarterly volatility that COVID-19 has created for us. Throughout the period, we've been very clear that the margins will move back towards normalized levels, and that started to happen in H1, with Q2 margins lower than those we reported in Q1. However, we now have less low margin supply aviation and marine volumes, and with growing higher margin lubricants and retail volumes, this provides a positive mix effect for us. There is a lot of understandable focus on how the oil price impacts our margins, and I wanted to address that with this slide, which shows how uncorrelated our margins are to the oil price. The simple answer is that changes in the oil prices really doesn't have much of an impact on our overall margin. You can see from the chart our quarterly unit margin over the last four and a half years, together with the quarterly average Brent crude price, and there is almost no correlation. Our margins consistently sit in the window between $70 to $75 per 1,000 litres, and for four of the five times it wasn't in that range, it was due to the volatility caused by COVID-19 over the last 12 months. The reason behind this is that we operate a cost-plus model, so the increasing oil price is passed through to the customer. As I just mentioned, there are obviously some impacts on specific parts of the business, such as lubricants, and there is more volatility in the deregulated markets as these are competitive and not all of our peers will act in the same manner. But the cost plus nature of the regulated markets where the government sets the pump price and we don't compete on price at the pump really helps to smooth our margins and create stability for us. As a reminder, 20 of our 23 markets are regulated from a retail fuel perspective. So what does the strong performance mean for cash flow and what a difference a year makes? The improved earnings drove the pickup in cash flow and working capital also provided a small inflow. H1 last year was impacted both by the pandemic but also by $111 million of payments carried over from the end of 2019. This meant that we generated $90 million of adjusted free cash flow, even after investing $60 million back into the business, 36% higher than the capex spend in the first half of 2020. Of the H1 capex, around $34 million was investment in growth capex. The other key point we made at the full year results is that we now have a solution in Kenya to the dynamics of the import tender system that means we should no longer have the major swings in working capital. We still sell a high-value product, and so there will always be some movement in working capital depending on the timing of payments across the business. Moving across to the balance sheet. As you know, we run a very conservative balance sheet, which helped us weather the impact of the pandemic and continue to invest in our future. During the period, we saw a small pickup in net debt as we paid the dividend, but leverage continued to fall as adjusted EBITDA picked up. We also took the decision to pay back the last of the outstanding amounts under the RCF, having paid back $110 million last year, and so now the only long-term debt is the bond we issued last year, which matures in 2027, although the current RCF remains available to us for a number of years. At the full year results, we gave some technical guidance to help with modeling, and it remains largely the same at the half year. We still expect to spend around $160 million of capex this year, with 60% of this on growth. As Christian will comment on shortly, we have made a very good progress on site openings and believe we will now comfortably be at the top end of our stated range of 90 to 110 new sites for the year. Both our expectations for the full year net finance charge and ETR remain in line with what we said previously. Finally from me is our interim dividend. We are a growth business, but we are committed to shareholder returns and have demonstrated that during the pandemic. In March, we increased the full year payout ratio to 50% from the previous 30% and have now declared the first interim dividend under that policy. With today's dividend, it will bring the total amount we have paid to shareholders to over $100 million since the onset of the pandemic. We believe that combined with our positive results, this really shows our commitment to growing both our business and shareholder returns. With that, I'll hand back to Christian.